Netflix’s (NASDAQ:NFLX) hit streaming series Squid Game recently sent shares of NFLX to new 52-week highs last week. NFLX stock rallied after posting strong subscription growth in its quarterly results.
Yet those quarterly figures are not Netflix’s highlight. On the conference call, management and analysts calling to ask questions couldn’t get enough of Squid Game, the company’s best series launch ever, which garnered 142 million viewers in just a few weeks.
What is even more impressive is the viewership outside of the North American market. Netflix owes dominance in South Korea to its content team in the country. They ended up choosing the biggest title of 2021.
Co-CEO and Chief Content Officer Ted Sarandos said that the Netflix team in Korea recognized something no one else did. This created an environment for the creators of that local show to succeed. Furthermore, the show became viral. Viewers could identify with the deep struggle of deep financial debt as the rich became richer. The inexpensive cost of producing show relative to its gargantuan return will spur competitors to copy Netflix’s model. Streaming firms may copy the Squid Game’s underlying story without any success. Copy-cats will not have an easy time emulating the show’s originality. Netflix could release a sequel, which will probably fail, too. The writers probably did not expect the story to resonate as well as it did. Any rushed writing on a sequel will not appeal to viewers.
Here are 7 streaming stocks to tune into after Netflix struck gold with Squid Game:
- Netflix (NASDAQ:NFLX)
- Apple (NASDAQ:AAPL)
- Comcast (NASDAQ:CMCSA)
- Disney (NYSE:DIS)
- fuboTV (NYSE:FUBO)
- Roku (NASDAQ:ROKU)
- AT&T (NYSE:T)
Apple, Netflix, and Roku are the highest quality among these picks according to StockRover. As a trade-off, investors must pay relatively more for those stocks. By contrast, fuboTV has the lowest value and quality score. Readers should interpret the score as temporary and unreflective of upcoming growth. As FUBO’s sports-betting offering grows, those scores should increase.
Netflix (NFLX)
Netflix posted revenue growth of 16.1% year-over-year (YoY) to $7.48 billion. Earnings per share topped $3.19.
In the fourth quarter, the company expects revenue of $7.71 billion and EPS of 80 cents. Global streaming paid net additions of 8.5 million make for a healthy forecast. Before Squid Game’s success and the strong subscriber growth, investors abandoned Netflix stock. But the global streaming giant proved that it can acquire content at low costs. Viewers are more than willing to watch foreign streaming series for their unique cultural offering.
Besides its hit Korean series, Netflix continued to demonstrate strong average revenue per membership. In the emerging markets, ARM was $11.65, up 7% YoY. Asia Pacific ARM grew by 4% YoY to $9.60. Latin America’s ARM was $7.86, up 8% YoY. And in US/Canada (UCAN), revenue rose by 10% YoY to $14.68. UCAN is Netflix’s biggest market, accounting for $3.2 billion of total revenue.
The reopening of businesses post-Covid could hurt viewership. Netflix’s Chief Financial Officer, Spence Neumann, thinks that the service will benefit from a big return on English language series, including Cobra Kai, Tiger King, and The Witcher.
Apple (AAPL)
Apple recently disrupted the mobile advertising market with its new privacy settings. It also launched new Mac computers, refreshed the iPhone and iPad line-up and updated its AirPods. Its TV streaming service will benefit from a growth in device sales.
On Apple TV Plus, the service has new series releases including Invasion and The Morning Show. Streaming services are still in a growth phase, especially considering Apple said that it had under 20 million subscribers. It probably would have preferred not to reveal the figure, but needed to do so because at the time, the International Alliance of Theatrical Stage Employees was planning to strike.
Apple’s streaming service is a bonus to the underlying stock. The device giant will benefit from protecting user privacy. This will prevent its users from getting tracked by advertising firms. Growth in iPhone sales will give Apple a chance to pitch its streaming music and video services and the company will benefit from low acquisition costs for sign-ups.
Comcast (CMCSA)
Comcast reportedly spent billions on Peacock, its flagship streaming service. Peacock started slowly when it debuted; in July, it had only 3 million paying subscribers out of its 14 million monthly users.
Peacock had films like Halloween Kills showing simultaneously online and in theaters. This may attract sign-ups but ultimately cost more than it was worth for Comcast. As companies end plans for simultaneous releases, Comcast will need to modify its video over the internet strategy.
Bullish divergence
In the chart above, CMCSA stock failed to break out above resistance at the 50-day simple moving average. Below the stock chart, you can see that the moving average convergence divergence slope rose.
The rising MACD and falling stock price suggests that Comcast stock could rebound next.
Comcast is still in the early days of integrating streaming apps with the Peacock platforms. As more people use Peacock each month, Comcast may cross-sell its cable subscription and Internet plans to customers. The more customers save on a bundled plan, the higher Comcast’s revenue and margins will rise.
On Wall Street, analysts have an average price target of around $68.00, according to Tipranks.
Disney (DIS)
Disney’s theme parks will thrive as the pandemic-related lockdown eases. This should more than counterbalance any unlikely falling momentum in its streaming service.
Disney+ is a growth opportunity that will lift DIS stock. The service costs less than Netflix when customers buy an annual subscription. And as filming activity increases, Disney will add more content and expand globally. This will boost subscriptions at rates higher than investors expect.
Disney shares are trading in a range. It could break out to the upside after the company reports quarterly results on Nov. 10. But bears are speculating that streaming will slow. Hybrid movie releases also add to the revenue uncertainties.
Disney will need to find a balance between maximizing revenue from theatres and boosting subscriptions through exclusive releases on its streaming service. Investors will frown on slowing subscriber growth by assigning a lower revenue multiple to the stock. P/E multiple declines are a potential risk factor.
Cautious investors will get better insight into Disney’s streaming services growth in the next quarterly report. Management will need to explain how Disney will reinvest growing earnings from its theme parks to streaming content.
fuboTV (FUBO)
FUBO stock traded close to $35 earlier this month before falling to $21.42. But investors are ignoring that fuboTV increased its lead in its sports-first live TV streaming platform.
Last month on Oct. 11, it announced a carriage agreement with AT&T SportsNet Rocky Mountain. fuboTV will stream AT&T’s regional coverage of three professional sports teams. They are the Seattle Mariners from the Major League Baseball, the Portland Trail Blazers from the National Basketball Association, and Seattle Kraken from the National Hockey League.
To complement its sports streaming, fuboTV ‘s Fubo Gaming unit is getting licenses for mobile event wagering. For example, it received a license to offer mobile event wagering from Arizona’s Department of Gaming on Sept. 2. Previously, it received approval to offer online sports wagering in Iowa. In its Q4 shareholder letter, fuboTV said, “We plan to launch free-to-play predictive games in the third quarter (first to fuboTV subscribers and later to all consumers) and our sportsbook in the fourth quarter.”
Fubo will integrate Sportsbook into its live TV streaming platform. Viewers will have both seamless viewing and may enter wagers.
Roku (ROKU)
When the world experienced the first wave of the pandemic, Roku stock plunged in March 2020. It then staged an incredible run-up to peak at almost $500. ROKU would subsequently report disappointing subscriber growth in the last quarter, hurting the share price.
Roku’s dispute with YouTube TV could hurt the stock further, creating a better entry point for investors. Roku wrote that YouTube TV could come off its platform if the two companies cannot negotiate a deal that would resolve search concerns. Roku said that big tech enterprises are exerting their market power to extend control over independent businesses.
Roku accused YouTube of putting the fair and open competitive streaming marketplace at risk. Since it does not make any money from YouTube’s ad-supported video sharing, it can drop the service. Still, this is a lose-lose scenario because Roku users may find YouTube’s offering appealing.
Roku is building its content library to attract subscribers. It launched 23 Roku originals on Aug. 13, including four all-new premiers available in the U.S. Canada, and the U.K. As the company adds more content, user activity will increase, lifting the value of Roku’s platform.
Other than a recent “sell” rating from one analyst, others remain bullish. The average price target is $408, according to Tipranks.
AT&T (T)
Last Friday, AT&T stock closed at a 52-week low. Short-sighted investors need to look at the movie ticket sales in the quarter.
AT&T’s Dune stands a good chance of topping the weekly movie box office in the next few weeks. AT&T also streamed the movie simultaneously with the theater release. This could spur HBO Max subscription growth without hurting movie sales. Plus HBO Max is streaming the film on a 2.39:1 aspect ratio. Movie buffs will likely prefer to watch it in large format on IMAX.
In the third quarter, CFO Pascal Desroches said that HBO Max had around 70 million global subscribers. This is due to growth in its international markets. The average revenue per user remains low because of the high international base. In late June, AT&T launched HBO Max in Latin America, and will next be entering Spain and the Nordic region. This should result in a sustained growth rate for the streaming service.
But HBO MAX’s launch in Europe will not come cheap. The company expects significant costs ahead. Also, it will have high advertising sharing costs through the WarnerMedia and DirectTV advertising sharing arrangement. After forecasting a free cash flow target of around $26 billion, AT&T is an income-generating stock and a play on the growth in streaming.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.