How we watch movies and TV shows has drastically changed over the past few years. In addition to traditional cable TV operators, several other options exist today. Let’s look at three companies leading different sectors in the entertainment industry.
Netflix, Inc. (NASDAQ:NFLX), Comcast Corporation (NASDAQ:CMCSA) and TiVo Inc. (NASDAQ:TIVO) all provide different services but considerable upside for investors looking to buy and hold.
In constant growth
Trading at 526 times its earnings, Netflix, Inc. (NASDAQ:NFLX) is seen by many as an overvalued stock; but it is not. Constantly expanding its content and client base, this well-known Internet giant now reaches about 29 million households in the U.S., or one out of four. Not only should this company continue to penetrate various markets as the Internet-using population grows, but it could also increase revenue though raising prices. Even in the worst of cases, if people responded terribly to $2 to $4 upcharges in subscription fees, the firm could still acheive huge profit gains, reaching about a $10-$20 increase (or over 2000%) in earnings per share. Given its profit potential, I’d say that this company is a buy, especially as consensus estimates expect 19.5% growth per year over the next five years, compared to the industry’s 16.6% average. Here are some other reasons to believe that Netflix, Inc. (NASDAQ:NFLX) will outperform its peers in the long-run:
- Its U.S. subscriber base is constantly expanding. Over the past year, domestic streaming subscriptions surged by almost 25%. The company is constantly improving content, and international expansion should drive growth in the upcoming years as streaming services start to displace traditional multimedia-content providers.
- In particular, overseas markets have been contributing outstanding results. Last quarter, the company reported a 133% upsurge in the number of users. This trend is expected to continue as the company extends its international presence and product portfolio, especially by adding original content. Not only should its original series attract new users, but also help retain existing users.
- The company’s incursion into the fast-growing mobile and tablet segment has proven pretty successful and will most likely boost its subscriptions (its main income source) going forward.
- Last quarter results portray an even more encouraging outlook for stockholders. Non-GAAP earnings reached $0.31 per share, 13 cents above the Zacks Consensus Estimate and up from an 8-cent loss in the year-ago quarter. This increase was accomplished on the back of a 17.7% upsurge in revenue due to augmented subscriptions.