Streaming Services Drive Growth: 3 Stocks to Watch Amid Earnings Season

Netflix (NFLX), Disney (DIS), and other streaming services have seen growth in subscriber numbers despite claims of streaming fatigue. NFLX's Q1 earnings report showed 12% YoY revenue growth and 27% YoY EPS growth, while DIS's streaming operation turned a profit for the first time. These companies have found ways to be profitable, such as offering discounted monthly service prices and making up for it with ad revenue. Analysts remain bullish on these stocks, with several upgrades suggesting they will continue to post strong results.

In the face of claims of streaming fatigue, several streaming services have shown remarkable resilience, with subscriber numbers continuing to grow. Netflix (NFLX) and The Walt Disney Company (DIS) are among the standout performers, driven by innovative strategies that have made them profitable.

Netflix's Resilience

Netflix reported a strong first quarter, with 12% year-over-year (YoY) revenue growth and 27% YoY earnings per share (EPS) growth [1]. Despite being priced at a premium, the company's strategic pivots to increase monetization without alienating subscribers have proven effective. Analysts remain bullish, projecting 22% earnings growth for the full year [1]. The company's strong performance is a testament to its ability to maintain subscriber growth and engagement.

Disney's Comeback

The Walt Disney Company is experiencing a comeback, with its streaming operation turning a profit for the first time [2]. Disney's streaming services, including Disney+, Hulu, and ESPN+, account for about 25% of the company's annual revenue. While not a pure-play streaming stock, Disney's streaming operation provides predictable revenue that is more defensive than its theme park and cruise line operations. Several analysts have raised their price targets on DIS stock, suggesting a potential catalyst in the company's earnings report on August 5 [2].

Roku's Intriguing Position

Roku (ROKU) offers both the lock (smart TVs and Roku sticks) and the key (ad revenue and subscriber commissions) to streaming services. The company's top-selling TV operating system (OS) positions it well in the connected television (CTV) space. However, while the stock has seen significant gains in the past three months, it is not yet profitable. Investors should be cautious and monitor the company's earnings report on July 30 [3].

Conclusion

The streaming services sector continues to demonstrate growth and resilience despite challenges. Netflix and Disney's strong performance in the first quarter underscores their ability to adapt and innovate. While Roku's position is intriguing, investors should exercise caution given the company's lack of profitability. As earnings season progresses, investors will have more clarity on which companies will continue to stand out.

References:
[1] https://www.investing.com/analysis/3-streaming-stocks-to-watch-as-subscribers-drive-growth-200664050
[2] https://www.ainvest.com/news/arm-holdings-stock-1-watch-growth-2507/
[3] https://www.barchart.com/story/news/33535209/is-netflix-stock-still-a-smart-buy-after-q2-earnings