The current screen actors guild (SAG AFTRA) strike is not being felt by consumers yet. With several blockbuster movies already finished production, there should be a steady stream of content for consumers to get through the summer.
But what about after that? Even if there’s a fairly quick resolution to the strike, industry executives say that there will be a lag to get fresh content in the pipeline. Remember, the strike doesn’t just affect filming but production as well. That could put pressure on streaming companies that are already slugging it out for subscribers.
With that in mind, it’s a good time to look at which streaming companies are well-positioned to deliver revenue and earnings even if the strike lasts longer than is currently expected.
Are You Ready for Some Football?
First up is Alphabet, Inc. (NASDAQ: GOOGL) the parent company of YouTube and YouTube TV. The streaming network is already a favorite among cord-cutters, and the attraction is likely to grow as football season kicks off once again.
That’s because YouTube TV spent $2 billion for the rights to the coveted NFL Sunday Ticket. You may not like the NFL’s business model as a consumer, but as an investor, you can follow the money. The deal that Alphabet inked with the NFL could rise to $2.5 billion. Either way, it’s more than the previous $1.5 billion contract the NFL had with DirecTV.
By at least one account, only about 25% of DirecTV’s 14 million subscribers had a Sunday Ticket subscription. And in its July earnings call, Alphabet didn’t give insight into early subscriber numbers. However, one of the goals the NFL accomplished with this switch was to make the package accessible to more users.
Alphabet is not a pure play on streaming. Investors have to decide if they want exposure to the rest of the company’s offerings. But GOOGL stock is trading at about 23x earnings. And with earnings projected to grow by at least 10% this year, the stock looks like a solid Buy for more reasons than just streaming.
Delivering Comfort Food for Streamers
Comcast Corporation (NASDAQ; CMCSA) is the next company on this list. Like Alphabet, Comcast isn’t a pure play on streaming, but it’s closer. And for the purposes of this article, it’s important to bore in on the company’s streaming service, Peacock.
In the company’s second-quarter earnings report, the company reported that Peacock subscriptions had nearly doubled on a year-over-year basis. Streaming aficionados may quickly remark that is due to the company having the streaming rights to Yellowstone. And that may be true, but it also has the streaming rights to shows like Parks & Recreation and The Office which remain two of the most popular shows.
And keep in mind the company also successfully released The Super Mario Bros. Movie which will be going to streaming very soon.
CMCSA stock is up 6% on July 27 after its double beat on second-quarter earnings. But with earnings expected to climb over 11% in 2023, there’s likely to be much more upside to come for this media giant.
This Essential Streaming Stock May Not be Undervalued for Long
You can look at Roku, Inc. (NASDAQ: ROKU) as a question of the glass being half empty or half full. The optimists will point out that ROKU stock is up 77% in 2023. The pessimists will note that despite that gain, the stock is still down 17.75% in the last 12 months.
At issue is advertising revenue which has weighed on the company’s earnings and has slowed revenue growth. But slowed doesn’t mean stopped. Roku is still growing revenue on a year-over-year basis. And that is expected to continue when the company reports earnings after the market closes on July 27.
There’s no question that Roku is facing tough comps as streaming companies are dealing with an ad recession. However, there’s nothing to suggest that it means the connected ad model is broken. It’s likely due to more companies monitoring their ad spend as they navigate macroeconomic conditions.
But as long as the company’s Smart TVs and Roku sticks remain one of the most popular ways for cord-cutters to start streaming, the company will still be relevant and may not be undervalued for long.
