The streaming sector remains as volatile as ever, and the push to consolidation has continued this year.
The merger between Warner Bros. Discovery and Paramount closed earlier this month, forming Skydance (NYSE: SKYD). This new Hollywood powerhouse will have to overcome roughly $80 billion in debt to deliver results for investors.
Roku (ROKU -0.10%) agreed to be acquired by Fox Corporation in a move by Fox to expand its distribution and reach, as Alphabet’s YouTube gains market share over traditional streamers.
Netflix (NFLX -0.21%) remains the industry leader, but a lot could change in the next few years. Let’s take a look at where Netflix and its streaming peers could be by 2030.
Image source: Getty Images.
1. Netflix
Netflix invented streaming and continues to lead the industry, though doubts about its future have grown this year.
The stock has tumbled as it’s reported weak engagement and as it’s lost market share to YouTube. Netflix no longer reports subscriber numbers, so we have less insight into the business than we once did.
Today’s Change
(-0.21%) $-0.15
Current Price
$70.46
Key Data Points
Market Cap
Day’s Range
$70.42 – $71.52
52wk Range
$65.08 – $124.86
Volume
27.8M
Avg Vol
36.7M
Gross Margin
49.53%
The question for Netflix is whether it can maintain its current level of growth in the low-teens revenue range. If it can do that, the stock could be 50% higher or better by 2030. However, if the growth in the business continues to slow, Netflix stock is likely to underperform. While a decline in revenue seems unlikely, Netflix’s original content has been underwhelming, and it will have to turn that around for its growth rate to stabilize.
2. Disney
Disney (DIS +0.08%) has been slow to find success with its streaming business after launching Disney+, but its streaming platform, which also includes Hulu and ESPN, is finally profitable and is delivering strong bottom-line growth.
Under new CEO Josh D’Amaro, the company is in the process of restructuring under his “One Disney” plan, which will enable viewers to easily use all three of its services in one app. Additionally, the company is embracing that strategy to do more to bundle its parks and experiences with streaming, using streaming to market the parks, and to better target its experiences to individual viewers’ tastes.
Today’s Change
(0.08%) $0.09
Current Price
$108.58
Key Data Points
Market Cap
Day’s Range
$107.95 – $110.16
52wk Range
$92.19 – $117.09
Volume
10.6M
Avg Vol
9.4M
Gross Margin
32.19%
Dividend Yield
1.38%
The plan makes sense, but Disney has been slow to execute these strategies in the past, so investors may want to wait and see how the rollout goes. Disney stock has gone nowhere in the last decade, but it could finally make gains as streaming profits grow. After so much underperformance in recent years and with the entertainment business largely mature, I’m skeptical that the company can outperform the market between now and 2030.
3. Skydance
The newest kid on the block in streaming has the most to prove. Skydance combined two struggling legacy streaming platforms, Warner Bros. Discovery and Paramount, into one, and absorbed roughly $80 billion in debt to do it.
It also settled a lawsuit with several state attorneys general. It made a number of compromises, including releasing at least 30 theatrical films per year over the next five years. That commitment, among others, could hamper its ability to turn profitable.
Given its debt and the restrictions from the settlement, Skydance faces an uphill battle through 2030. The stock will struggle to outperform the market.
4. Comcast
Finally, Comcast (CMCSA +0.97%) is the last major streaming stock on the list, following the wave of consolidation. However, the Peacock parent has less exposure to streaming than other companies on this list, as its primary business is broadband internet.
With its cable business declining and broadband mature, the company has struggled to grow. While Peacock offers a good mix of entertainment and has reached 48 million users in the U.S., it doesn’t operate internationally and is unlikely to have a significant impact on Comcast’s bottom line.
Today’s Change
(0.97%) $0.20
Current Price
$20.88
Key Data Points
Market Cap
Day’s Range
$20.65 – $21.03
52wk Range
$20.48 – $32.85
Volume
23.2M
Avg Vol
29.1M
Gross Margin
56.77%
Dividend Yield
6.38%
For dividend and value investors, Comcast may be attractive, but the business and the stock have been in decline for years, and that trend will be difficult to reverse.
What it means for investors
Legacy operators still face headwinds from the decline of the cable and box office businesses, giving Netflix an advantage over its peers.
Still, all of these companies are competing against big tech companies like Amazon, Alphabet, and Apple that see streaming as a way to pad their user ecosystems and make them stickier, and they have the means to operate at a loss if needed.
Therefore, all four of these stocks face challenges in addition to streaming reaching maturity in established markets like North America. Netflix still looks like the best bet, given its established global presence and scale, but its days of delivering market-crushing growth for investors may be over.
