The Walt Disney Company (NYSE:DIS)’s top-line has grown in nine out of the past ten years, with earnings advancing from about a $1.10 in 2004 to over $3.10 last year. The dividend has also been increased on a regular basis. A price to earnings ratio around 20 is high but reasonable.
Growth focused investors should take a look, but the yield of around 1.2% isn’t enough to attract income seekers. That said, if the Aereo lawsuits start to attract more public notice, a share price drop could present a buying opportunity.
Comcast Corporation (NASDAQ:CMCSA), which owns NBC and cable systems, could also feel the pinch if Aereo successfully defeats the suits brought against it.
Big Aspirations
Netflix, Inc. (NASDAQ:NFLX), however, has a bigger issue. It wants to be an Internet television station. Aereo is one step better, offering all of the stations in a customer’s local viewing area. It’s possible that customers could pair Netflix, Inc. (NASDAQ:NFLX) with Aereo to get something of a cable-like service with television, but that could be a mixed blessing—Aereo could severely limit Netflix’s ability to push through price hikes.
Customer growth is the driving force for Netflix, Inc. (NASDAQ:NFLX), but that can only last so long in a quickly saturating market before the company needs to earn more from the customers it has. In fact, it just missed Wall Street expectations on customer acquisitions in the June quarter. Growth prospects have driven the shares from around $50 to around $250 in less than a year. The shares have a trailing PE of over 300. The stock is overpriced now, if Aereo gains traction, concerns about top-line growth at Netflix, Inc. (NASDAQ:NFLX) could eventually take the shares lower.
Disruptive
IAC/InterActiveCorp (NASDAQ:IACI) is publicly and financially backing Aereo and is a good way to buy into the upstart. Hulu, Netflix, Inc. (NASDAQ:NFLX), The Walt Disney Company (NYSE:DIS), CBS, and Comcast Corporation (NASDAQ:CMCSA), among others, are closely watching the company’s progress. As an investor in any of these companies, you should be watching, too. With regard to Netflix, Aereo’s success could be an immediate benefit, but a longer-term negative.
The article Aereo Wins Court Battle, Continues Disrupting TV Industry originally appeared on Fool.com and is written by Reuben Brewer.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Netflix and Walt Disney (NYSE:DIS). The Motley Fool owns shares of Netflix and Walt Disney. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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