Streaming service stocks are at the forefront of the entertainment industry's transformation, offering viewers unprecedented access to content across genres and languages. The shift from traditional cable to on-demand streaming has driven significant growth for companies in this space, making them key players in the digital economy.
Given this landscape, it might be wise to consider investing in three fundamentally strong streaming service stocks, Netflix, Inc. (NFLX), Amazon.com, Inc. (AMZN), and Alphabet Inc. (GOOGL), which have revolutionized access to content, shifting audiences away from traditional cable TV.
Competition among streaming giants has fueled innovation, with companies investing heavily in original programming and exclusive content. This race for differentiation has not only elevated production standards but also broadened the appeal of streaming services to diverse demographics. As per the 2024 Preserve Viewer Choice Coalition survey, 64% of viewers prefer streaming video over cable or satellite services, redefining the next era of entertainment.
Moreover, the rise of ad-supported streaming tiers is reshaping the industry’s revenue model. Consumers are also opting for ad-supported alternatives as streaming services multiply and subscription costs rise. This hybrid approach balances subscriber growth with diversified income streams, further solidifying the financial health of streaming service providers.
Further, the global video streaming market is anticipated to reach $416.84 billion by 2030, exhibiting a CAGR of 21.5%. As consumer preferences continue to evolve, the adaptability and innovation of these companies position them well for sustained growth in the entertainment landscape.
Considering these conducive trends, let’s examine the Internet industry stocks in detail, beginning with the third choice:
Stock #3: Netflix, Inc. (NFLX)
NFLX provides entertainment services that acquire, license, and produce content, including original programming. The company offers TV series, documentaries, feature films, and games across various genres and languages, operating in approximately 190 countries.
On December 16, NFLX partnered with Domino’s Pizza (DPZ) to promote the upcoming season of Squid Game by offering free Emergency Pizza for a year to players with the lowest scores in Squid Game: The Experience.
On December 10, NFLX and Mastercard Incorporated (MA) teamed up to offer exclusive benefits such as presale tickets at Netflix House. This partnership will allow MA to be the preferred payment partner for Netflix Bites, Stranger Things: The First Shadow, and Netflix House in the upcoming year.
NFLX's trailing-12-month ROCE and ROTA of 34.71% and 14.88% are 635.2% and 704.8% higher than their respective industry averages of 4.72% and 1.85%. Likewise, its trailing-12-month asset turnover ratio of 0.74x is 49.8% above the industry average of 0.49x.
NFLX’s revenue for the third quarter (ended September 30, 2024) increased 15% year-over-year to $9.82 billion. The company reported an operating income of $2.91 billion, indicating a 51.8% growth from the prior-year quarter. NFLX’s net income came in at $2.36 billion and $5.40 per share, up 40.9% and 44.8% year-over-year, respectively.
Street expects NFLX’s revenue for the fiscal fourth quarter (ending December 2024) to increase 14.8% year-over-year to $10.14 billion. Its EPS for the same period is expected to register a 100.5% growth from the prior year, settling at $4.23. In addition, it surpassed the consensus revenue estimates in each of the trailing four quarters, which is promising.
Shares of NFLX have surged 85.8% over the past year and 44.8% over the past nine months to close the last trading session at $909.05.
NFLX’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
NFLX has a B grade for Quality. It is ranked #20 out of the 50 stocks in the A-rated Internet industry. Click here to see the additional ratings for NFLX (Growth, Value, Momentum, Stability, and Sentiment).
Stock #2: Amazon.com, Inc. (AMZN)
AMZN is a global giant in the retail sector, offering consumer products, advertising, and subscription services through online and physical stores across North America and international markets. The company operates through three segments: North America; International; and Amazon Web Services (AWS). The company owns Prime Video, one of the largest original content viewing platforms.
In terms of the trailing-12-month net income margin, AMZN’s 8.04% is 92.6% higher than the 4.18% industry average. Similarly, its 8.76% trailing-12-month levered FCF margin is 94.9% higher than the industry average of 4.49%. Also, its trailing-12-month ROTA of 8.53% compares to the industry average of 3.95%.
For the third quarter of 2024, which ended on September 30, AMZN's total net sales increased 11% year-over-year to $158.88 billion, while the operating income stood at $17.41 billion, up 55.6% year-over-year. Its net income amounted to $15.33 billion, representing an increase of 55.2% from the last year’s period. Also, the company’s EPS for the quarter increased 52.1% year-over-year to $1.43.
Analysts expect AMZN’s revenue for the fourth quarter (ending December 2024) to increase 10.2% year-over-year to $187.25 billion, while its EPS for the same quarter is expected to grow 47.8% from the prior year to $1.48. Moreover, the company has surpassed Street EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 47.9%, closing the last trading session at $224.92.
AMZN’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Sentiment and a B for Growth, Momentum, and Quality. Within the same A-rated industry, it is ranked #15. Click here to see AMZN’s ratings for Value and Stability.
Stock #1: Alphabet Inc. (GOOGL)
GOOGL is the powerhouse behind a spectrum of tech innovations and various products and platforms worldwide. It operates through Google Services; Google Cloud; and Other Bets segments. The company is also the renowned owner of YouTube.
The stock’s trailing-12-month EBIT margin of 32.09% is 227.7% higher than the industry average of 9.79%. Similarly, its 32.10% trailing-12-month ROCE is 579.8% above the industry average of 4.72%. Also, its trailing-12-month asset turnover ratio of 0.82x compares favorably to the industry average of 0.49x.
In the fiscal third quarter, which ended on September 30, 2024, GOOGL’s revenues increased 15.1% year-over-year to $88.27 billion. Its income from operations rose 33.6% from the year-ago value to $28.52 billion. The company’s net income amounted to $26.30 billion and $2.12 per share, reflecting increases of 33.6% and 36.8% from the prior-year quarter, respectively.
The consensus revenue estimate of $96.67 billion for the fiscal fourth quarter (ending December 2024) represents a 12% increase year-over-year. The consensus EPS estimate of $2.12 for the ongoing quarter indicates a 29.1% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 38.4% over the past year and 28.7% over the past nine months to close the last trading session at $191.41.
It’s no surprise that GOOGL has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Sentiment and a B for Quality. Out of 50 stocks in the industry, GOOGL is ranked #14.
Beyond what is stated above, we’ve also rated GOOGL for Growth, Value, Momentum, and Stability. Get all GOOGL ratings here.
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AMZN shares were trading at $225.27 per share on Monday afternoon, up $0.35 (+0.16%). Year-to-date, AMZN has gained 48.26%, versus a 25.90% rise in the benchmark S&P 500 index during the same period.
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