3 Streaming Stocks to Sell as Competition Gets Too Hot

Stocks to sell

Competition is indeed heating up for streaming players as many households are starting to use Free-ad supported streaming services and the “average viewing time” of paid streaming services is dropping. In October, research firm Kantar reported that, as of the third quarter “Free-ad supported streaming (FAST) (was) the fastest growing streaming tier in the U.S., with 47% of U.S. households using a FAST service each week.”

Moreover, the firm noted that “11% of all (video-on-demand) streaming services (went) unused every week in Q3, up 10% from Q2.” In the last few months, I’ve noted that my wife and I are watching FAST services including Roku’s (NASDAQ:ROKU) Roku TV, Fox’s (NASDAQ:FOX) Tubi and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube much more than we used to.

As a consequence, we’ve already dropped Paramount’s (NASDAQ:PARA) Paramount TV and we’ll be done with Hulu as of June. Based on Kantar’s data, it appears that many other households are turning to FAST services more and paid services less. The price hikes adopted by most of these services in recent months will only cause the latter trend to accelerate further.

Disney (DIS)

Source: Shutterstock

Disney’s (NYSE:DIS) direct-to-consumer unit, which is dominated by its streaming channels, made some positive strides in its fiscal fourth quarter that ended on Oct. 1. Indeed, the unit’s revenue climbed 12% versus the same period a year earlier to $5.04 billion, while its operating loss dropped 70% to $420 million. But the fact that the firm’s much-vaunted streaming channels are still bleeding relatively large amounts of cash does not bode well for Disney and DIS stock. Also noteworthy is that the unit’s bottom line was boosted tremendously by huge layoffs which are not likely to be repeated in the future since the easy cuts have been made.

What’s more, given the increasingly tough competition from FAST channels, I would not be at all surprised if DIS misses its target of making its streaming channels profitable by next fall. If the company misses that target, DIS stock is likely to stumble significantly.

Further, the company’s decision to hike the monthly charges of Disney+ and Hulu in October by $3 each is likely to cause a significant number of viewers to drop the channels. After all, they can instead turn more to Netflix (NASDAQ:NFLX) –a “must-have” for most households –and the FAST services.

Warner Bros. Discovery (WBD)

Source: Ingus Kruklitis / Shutterstock.com

Wells Fargo recently downgraded its rating on Warner Bros. Discovery (NASDAQ:WBD) to “equal weight” from “overweight.” Moreover, the firm slashed its price target on the shares to “equal weight” from “overweight.”

The bank noted that the company’s earnings have declined since Warner Bros. combined with Discovery to form Warner Bros. Discovery. Moreover, Wells warned that WBD’s new strategy of licensing its content to outside streaming services will cut into the revenue generated by its own streaming service, Max.

In the third quarter, the revenue generated by WBD’s streaming services rose an unimpressive 5% versus the same period a year earlier. Its EBITDA, excluding certain items, increased to $100,000, much better than the adjusted EBITDA loss of $600,000 that it posted during the same period a year earlier. However, the improvement was primarily driven by cost cutting that’s unlikely to be duplicated going forward.

Analysts, on average, expect the firm’s top line to increase just 1% this year. The company’s woes definitely make it one of the streaming services to sell at this point.

Comcast (CMCSA)

Source: Shutterstock

The revenue of Comcast’s (NASDAQ:CMCSA) Media unit, which includes its Peacock streaming business, rose just 3% in the third quarter versus the same period a year earlier, while the unit’s EBITDA, excluding certain items, tumbled 50% year-over-year to $108 million. Also importantly, the unit’s operating expenses jumped nearly 5% year-over-year.

Comcast’s decision last summer to increase the prices that it charges for its ad-supported and premium tiers b y $1 and $2 per month, respectively, could stunt its growth over the longer terms as the FAST options become more popular.

And in a separate, worrisome trend for Comcast, it lost a net total of 34,000 internet broadband subscribers and 389,000 net TV subscribers in Q4. While it did gain a net total of 310,000 wireless customers during the quarter, its total revenue for Residential Connectivity & Platforms dropped 1.3% year-over-year, excluding currency fluctuations.

On the date of publication, Larry Ramer did not hold (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.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

Articles You May Like

3 U.S. Stocks That Could Take a Hit as Japan Slips Into Recession
3 Stocks Under $10 for 10-Bagger Returns by 2030
3 Battery Stocks That Could Be Multibaggers in the Making: February Edition
3 Stocks With the Potential to Knock Tesla Out of the Magnificent 7
Dividend Cuts: 3 Stocks at Risk of Slashing Payouts Like Southern Copper