What is the Best Streaming Stock to Buy Right Now?

18 May 2023

With various players vying for dominance in the market, it’s crucial to identify the streaming stock that offers the best potential for growth and profitability. In this article, we will analyze three prominent contenders: Warner Brothers Discovery, Netflix, and Disney, to determine which one presents the most compelling investment case.

Warner Brothers Discovery (NASDAQ:WBD)

Warner Brothers Discovery‘s streaming unit achieved a remarkable turnaround in Q1 2023, shifting from a loss of $654 million to a profit of $50 million. This significant shift towards profitability is a notable accomplishment, particularly considering that, apart from Netflix, most streaming companies are not yet profitable. The profit generated by Warner Brothers Discovery’s streaming unit represents a substantial triumph for the company and serves as evidence of CEO Zaslav’s determination to reduce debt and improve cash flow.

In our assessment, Warner Brothers Discovery occupies a promising position, poised to scale its user base by over 50 million within the next two years while maintaining profitability. With a projected expansion plan and a robust content portfolio, Warner Brothers Discovery stands at the sweet spot for growth. This, coupled with a favorable valuation, trading at just 15 times earnings, makes it an intriguing option for investors seeking exposure to quality media assets.

Netflix (NASDAQ:NFLX)

Concerns are mounting as the company approaches what we think are peak subscriber levels. The burning question is, what comes next for Netflix? Measures to stop password sharing and the implementation of ad-supported subscriptions have been introduced to improve profitability, but doubts persist. Trading at over 24 times earnings, the stock appears richly valued considering the lack of substantial growth. As competition remains fierce, and subscriber churn becomes a challenge, we maintain a neutral rating on Netflix.

The global paying subscriber count experienced a growth of 4.9% compared to the previous year, reaching a total of 232.5 million. However, the performance varied across different regions. The US and Canada demonstrated a robust growth rate of 9%, while Latin America experienced a more moderate increase of 3%. In contrast, both the EMEA region and the Asia Pacific region witnessed a decline in subscriber numbers, with the latter experiencing a significant drop of 13%.

Disney (NYSE:DIS)

Disney delivered a mixed performance in the quarter, with some positive developments to note. Notably, streaming losses decreased from $1.1 billion in the previous quarter to $659 million, indicating progress in managing costs. On the revenue front, streaming revenues saw a healthy uptick of 12% to reach $5.5 billion. What’s particularly significant is the 20% increase in Average Revenue Per User (ARPU) in the US and approximately 6% internationally. This underscores the shift in focus towards generating actual profits from users rather than solely prioritizing rapid business expansion.

Disney remains our top pick in the media sector. With a reasonable valuation of 18 times earnings, Disney possesses a robust content library, including iconic franchises like Marvel and Star Wars. The company’s streaming service, Disney+, has gained significant traction and exhibits strong potential for further growth. As Disney continues to leverage its vast intellectual property and expand its global footprint, it remains an attractive investment option for those seeking stability and long-term returns.

Final Thoughts

When evaluating the best streaming stock to buy right now, investors must consider several factors, including growth prospects, valuation, and competitive dynamics. While Netflix faces challenges related to subscriber saturation, Warner Brothers Discovery emerges as an intriguing choice, with the potential for substantial growth and a comparatively attractive valuation. Disney, with its strong content portfolio and successful streaming service, also remains an excellent long-term investment option.

The streaming landscape continues to evolve rapidly, and staying informed and adaptable is key to capitalizing on the opportunities presented by this dynamic industry.

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