In this article, we discuss the 10 best streaming stocks to buy now. If you want to skip our detailed analysis of the streaming industry and these stocks, go directly to 5 Best Streaming Stocks To Buy Now.
Streaming stocks featured as ‘star-performers’ during the Covid pandemic, as millions forced to stay home turned towards digital mediums for entertainment. For the last several years, Netflix, Inc. (NASDAQ:NFLX) was by far the undisputed leader in the streaming market. But in April 2022, the firm reported subscriber loss for the first time in a decade. This pointed to how big names such Amazon.com, Inc. (NASDAQ:AMZN), The Walt Disney Company (NYSE:DIS), and Apple Inc. (NASDAQ:AAPL) have spent billions on launching and propping up their own streaming platforms, becoming fierce rivals in a market some say is near saturation. Spending on streaming content by these streaming giants reached $220 billion in 2021, and is set to cross $230 billion in this year.
Another phenomenon behind Netflix, Inc. (NASDAQ:NFLX)’s subscriber loss is the return to pre-pandemic normalcy for millions across the globe, giving users less time and opportunity to binge-watch their favorite shows at home. However, users, investors and critics all realize that streaming is the future of digital entertainment. According to a 2021 report by West Monroe, the average consumer in the United States spends an average of $273 per month on subscription services, which includes streaming platforms, home Wi-Fi, cloud storage, e-books, dating apps and mobile phone services. This was a 15% increase from 2018 levels, highlighting the pandemic’s role in accelerating the economy’s shift towards the online sphere.
The global video streaming market currently stands at roughly $473 billion, and is expected to reach approximately $1.69 trillion by 2029, growing at a compound annual growth rate (CAGR) of 19.9% during this period. Investors would be wise to take advantage of this trend, and put their money behind some of the best stocks in the streaming industry.
Photo by Ashley Byrd on Unsplash
Our Methodology
We examined the streaming industry and picked the top 10 stocks with a high number of user subscriptions, solid business fundamentals, future growth catalysts and positive analyst ratings. Hedge fund sentiment around each stock has been derived from Insider Monkey’s database of 900+ elite hedge funds tracked at the end of the fourth quarter of 2021.
10 Best Streaming Stocks To Buy Now
10. Limelight Networks, Inc. (NASDAQ:LLNW)
Number of Hedge Fund Holders: 11
Limelight Networks, Inc. (NASDAQ:LLNW) is a content delivery network company, which offers backend streaming technology to companies such as Disney and NBC. As these streaming giants continue to pump out more content and increase their viewership, Limelight Networks, Inc. (NASDAQ:LLNW) is well-positioned to grow in the coming years as a CDN stock. As of May 18, shares of the firm have soared 14.26% in the last 12 months, and 10.28% in the last 6 months.
On April 28, Raymond James analyst Frank Louthan maintained a ‘Strong Buy’ rating on Limelight Networks, Inc. (NASDAQ:LLNW) shares, noting that investors have an attractive buying opportunity if they are willing to focus on the firm’s underlying fundamental performance, and look past the temporary supply-chain issues and uncertainty around the firm’s Ukrainian operations.
Limelight Networks, Inc. (NASDAQ:LLNW) in March agreed to acquire Yahoo’s Edgecast, a provider of security, content delivery, and video services. The $300 million, all-stock deal looks set to drive higher sales and an increase in the company’s valuation in the coming months.
For the first quarter of 2022, Limelight Networks, Inc. (NASDAQ:LLNW) posted an EPS of -$0.04, in-line with consensus estimates. Revenue of $57.96 million for the quarter outperformed estimates by $1.81 million and showed an increase of 13.21% from the year-ago quarter.
Of the hedge funds tracked by Insider Monkey, 11 held positions in Limelight Networks, Inc. (NASDAQ:LLNW) at the close of Q4 2021 with a combined worth of $119.5 million. This is up from 10 hedge funds a quarter ago with $95 million worth of positions in the company. Lynrock Lake was the largest shareholder of Limelight Networks, Inc. (NASDAQ:LLNW) at the end of Q1 2022, with 3.45 million shares valued at $18.06 million.
In addition to Netflix, Inc. (NASDAQ:NFLX), Amazon.com, Inc. (NASDAQ:AMZN), and The Walt Disney Company (NYSE:DIS), Limelight Networks, Inc. (NASDAQ:LLNW) is a top streaming stock to buy.
9. iQIYI, Inc. (NASDAQ:IQ)
Number of Hedge Fund Holders: 15
iQIYI, Inc. (NASDAQ:IQ) is the largest streaming service in China, and is often dubbed the ‘Chinese Netflix’. Apart from a range of entertainment content, the firm also provides online gaming and online wallet services. As of the end of 2021, iQIYI, Inc. (NASDAQ:IQ) had around $97 million paid subscribers, almost all of them in China. The firm is a subsidiary of Baidu, Inc. (NASDAQ:BIDU), one of China’s largest tech conglomerates.
On May 16, JPMorgan analyst Alex Yao double upgraded iQIYI, Inc. (NASDAQ:IQ) to ‘Overweight’ from ‘Underweight’ with a price target of $8, up from $2. The analyst notes that the uncertainties plaguing the Chinese internet sector are abating on the back of announcements that regulators are easing their clampdown on the industry. Yao sees “early-cycle sectors” such as digital entertainment, local service, and e-commerce “to be the first batch of out-performers”, and now has a more balanced view on Chinese stocks.
Out of the 900+ hedge funds tracked by Insider Monkey at the close of Q4 2021, 15 reported owning stakes in iQIYI, Inc. (NASDAQ:IQ) with a total value of $358.5 million. At the end of March, Hillhouse Capital Management was the largest shareholder of the Chinese firm, with a $175 million stake consisting of 38.6 million shares.
8. Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders: 43
Up next is Roku, Inc. (NASDAQ:ROKU) on our list of the best streaming stocks to buy. It provides smart TV software which allows users to access a range of content and manage their subscriptions in the same platform. At the end of 2021, the firm reported approximately 60 million active users on its platform.
On May 3, Citi analyst Jason Bazinet maintained a ‘Buy’ rating on Roku, Inc. (NASDAQ:ROKU) shares and decreased the price target to $175 from $225. The analyst sees the market as less willing to underwrite future growth in current valuations for streaming companies after Netflix reported slowing growth, but sees Roku, Inc. (NASDAQ:ROKU) as well-positioned to benefit from the secular trend of ad money moving from linear to connected TVs.
Reporting its first quarter earnings on April 28, Roku, Inc. (NASDAQ:ROKU) posted an EPS of -$0.19, which came in above consensus estimates by $0.02. Revenue of $733.7 million for the quarter was above estimates by $15.1 million and beat year-on-year figures by 27.8%.
Cathie Wood’s ARK Investment Management was the largest shareholder of Roku, Inc. (NASDAQ:ROKU) at the close of Q1 2022, with 8.27 million shares valued at $1.03 billion. 43 hedge funds held $2.2 billion worth of positions in Roku, Inc. (NASDAQ:ROKU) at the close of the fourth quarter of 2021. This is down from 57 hedge funds with $2.82 billion worth of stakes in the firm a quarter ago.
7. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Holders: 53
Then there’s Spotify Technology S.A. (NYSE:SPOT), the world’s largest audio streaming platform. It boasts operations in 184 countries around the globe with more than 400 million monthly active users and 180 million premium subscribers.
On April 29, Citi analyst Jason Bazinet lowered the firm’s price target on Spotify Technology S.A. (NYSE:SPOT) to $165 from $240 and reiterated a ‘Buy’ rating on the company shares. The analyst feels that at the current price levels, the market is not sufficiently valuing Spotify’s emerging businesses and the potential for future growth in its paid music streaming service.
Investors were seen buying into Spotify Technology S.A. (NYSE:SPOT) shares at the close of the fourth quarter, where 53 hedge funds reported bullish bets on the company shares with aggregate holdings worth $3.46 billion. This is in comparison to 48 hedge funds in the preceding quarter. Disruptive tech investor Cathie Wood’s ARK Investment Management was the most prominent shareholder of Spotify Technology S.A. (NYSE:SPOT), holding a $662.7 million stake at the close of Q1 2022.
Spotify Technology S.A. (NYSE:SPOT) posted an EPS of $0.22 for the first quarter of 2022, beating estimates by $0.45. It also beat revenue estimates for the quarter, with the figure of $2.81 billion recording $28.1 million above analysts’ forecasts.
Here is what investment firm Rowan Street Capital LLC had to say about Spotify Technology S.A. (NYSE:SPOT) in its Q1 2022 investor letter:
“Let’s run through our top holdings in order to visualize what happened to their stocks in relation to the fundamentals of their underlying businesses:
We have owned Spotify (NYSE:SPOT) stock since its IPO year in 2018, and this company continued to be one of our highest long-term convictions despite the recent drawdown in the stock. We had outlined our investment thesis for SPOT in our H1 2021 Letter and in Q2 2020 Letter (we encourage you to review those). We believe there is great future for this company beyond what you can see and hear today!”
6. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Number of Hedge Fund Holders: 76
Warner Bros. Discovery, Inc. (NASDAQ:WBD) was formed in April 2022 after AT&T Inc. (NYSE:T) spun off its Warner Bros segment and merged it with Discovery (DISCA). Content kings such as HBO, CNN, Discovery and many movie blockbusters from Warner Bros, all now belong to the portfolio of Warner Bros. Discovery, Inc. (NASDAQ:WBD), making it one of the most exciting streaming stocks to buy now. The newly merged companies boast 100 million in collective subscribers.
On May 12, Cowen analyst Doug Creutz upgraded Warner Bros. Discovery, Inc. (NASDAQ:WBD) to ‘Outperform’ from ‘Market Perform’ with a price target of $24, down from $31. The analyst is cautious on the highly competitive streaming space, and believes the firm’s decision not to overspend in these consumer wars is a sustainable approach as compared to peers. He also notes that the potential to improve the performance of the Warner Bros segment under the management of Discovery is ‘compelling’, and expects the performance of Warner assets to improve.
Laurion Capital Management was the most prominent shareholder of Warner Bros. Discovery, Inc. (NASDAQ:WBD) at the close of Q1 2022, with 13.58 million shares valued at $338.4 million. In total, 76 hedge funds were long on the company shares.
Investment firm Silver Ring Value Partners talked about many stocks in its Q1 2022 investor letter, and Warner Bros. Discovery, Inc. (NASDAQ:WBD) was one of them. The fund said:
“Discovery completed the acquisition of the Warner Media business from AT&T in April, and the combined business is now named Warner Brothers Discovery. We are currently in the middle of an interesting technical event, following the spin-off special situation playbook.
The acquisition was structured as a spin-off of Warner Media, with AT&T shareholders receiving ~ 70% of the shares in the combined entity, or ~ 1.7B shares. Many of these shareholders owned AT&T for its phone business and its dividend. It appears that there has been elevated noneconomic selling as these shareholders exit regardless of price. On the other side, few if any investors want to buy the WBD shares prior to this forced selling being over.
This has caused the stock to decline substantially despite being already priced at a low valuation and reporting good recent results. The people selling aren’t likely considering either of those factors, which is what creates the opportunity. One wrinkle as compared to the usual spin-off special situation setup is that the non-economic selling is likely to last for some time given the retail nature of the shareholder base. This is different from the typical pattern where there is a quick sharp sell-off as institutional investors dump their shares quickly following the spin.
In anticipation of this situation, I had sold our equity prior to the major declines, and replaced it with January 2024 call options. I have since been using a portion of the cash generated from the equity sale to add to the option position as the stock price declines. While this does give up some time horizon, which I am usually loathe to do, both the technical selling and the question of the success of the merger integration are likely to be resolved well before then.
If I am correct and this is a much more valuable business than the market is giving it credit for, we will make a hefty profit. If I am wrong, and the combination of financial leverage, merger integration problems and secular risks are more serious than I foresee, we will have a moderate loss. I like our odds and the asymmetry of risk vs. reward.”
Along with Netflix, Inc. (NASDAQ:NFLX), Amazon.com, Inc. (NASDAQ:AMZN), and The Walt Disney Company (NYSE:DIS), Warner Bros. Discovery, Inc. (NASDAQ:WBD) is a streaming stock on the radar of investors.
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