The year 2020 turned out stellar for video streaming services, owing primarily to the outbreak of the COVID-19 pandemic. Video streaming was witnessing rising popularity over the years and the pandemic only helped in catapulting that demand. With movie theaters shut for the major part of the year and people stuck at home, they had to resort to several at-home forms of entertainment. Notably, video streaming took centerstage.
Subscriber Addition Going Good
Markedly, video streaming services saw rapid subscriber additions last year and it is also going well this year. Video streaming giant Netflix, Inc. NFLX surpassed the 200 million subscriber mark last year, as mentioned in a Visual Capitalist article. Moreover, the article mentioned that Amazon.com, Inc.’s AMZN Amazon Prime Video reached 150 million subscribers, as of the fourth quarter of 2020, even though it does include the overall membership to Amazon Prime. However, an article by The Hollywood Reporter cited that on Apr 15, Amazon stated that its Prime service surpassed 200 million subscribers.
Meanwhile, the video streaming service launched by The Walt Disney Company DIS in November 2019, namely Disney+, also reached 100 million subscribers within just 16 months of its launch, as cited in a CNBC article, blowing past the company’s initial subscriber goal of 60 million to 90 million by 2024. In fact, the article further mentioned that Disney reforecast its subscriber goal and now expects 230 million to 260 million subscribers by 2024.
Merger and Acquisitions to Boost Video Streaming
The video streaming space also looks set to receive a boost from a slew of mergers and acquisitions that were announced recently. Notably, AT&T Inc. T announced on May 17 that it would receive $43 billion to merge WarnerMedia with Discovery, Inc. DISCA. This would form a new media company with Discovery, thereby potentially increasing the competition in the media space, including video streaming as both the companies have their own streaming services like HBO Max and discovery+.
Moreover, on May 26, Amazon announced that it is going to acquire MGM Studios for $8.45 billion. Interestingly, MGM is the studio behind iconic franchises like “James Bond” and “Rocky” and also has a huge library of films and series that can allow Amazon to attract more customers to its Prime subscription.
Video Streaming Poised to Grow
The video streaming market seems ready to grow even as we move beyond the woes of the pandemic. What works in favor of video streaming is the massive library of content that the different services are offering to consumers. Whether it be films or series, the vast catalog based on different genres makes it attractive for users as it becomes easier for them to find content suited to their liking.
Meanwhile, the increasing competition within the video streaming space also means that it might be important for the services to focus more on the quality of their content. Reflective of these developments within the video streaming space, a report by Fortune Business Insights stated that the global video streaming market size is expected to witness a CAGR of 12% from 2020 to 2027.
4 Stocks to Keep an Eye On
The video streaming market seems poised to witness growth going forward as it increasingly becomes a preferred choice for users to consume video content, owing to the many conveniences they provide. Hence, this seems like a good opportunity to watch out for companies that can make the most of this continued uptick. Notably, we have selected four such stocks that carry a Zacks Rank #2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apple Inc. AAPL launched its video streaming service called Apple TV+, which offers a library of movies and original series. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 13.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 55.5%.
Netflix provides members the ability to receive streaming content through a host of Internet-connected devices. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 6.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 71.7%.
Amazon offers Amazon Prime, a membership program, which provides free shipping of various items; access to streaming of movies and TV episodes; and other services. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 13.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 34.5%.
Disney offers direct-to-consumer video streaming services consisting of Disney+/Disney+Hotstar, ESPN+, and Hulu. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 27.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 12.9%.
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