12 Best Streaming Service Stocks to Buy According to Analysts

4) Alphabet Inc. (NASDAQ:GOOGL)

Average Upside Potential: 19%

Number of Hedge Fund Holders: 202

Alphabet Inc. (NASDAQ:GOOGL) caters to the streaming service business mainly through YouTube, which happens to be one of the leading video streaming platforms globally. In Q3 2024, YouTube ads revenues rose $969 million and $3.4 billion from the 3 and 9 months ended September 30, 2023, to the 3 and 9 months ended September 30, 2024, respectively. This growth was aided by the brand advertising products followed by direct response advertising products, both of which were aided by higher spending by the advertisers.

YouTube remains a key component of Alphabet Inc. (NASDAQ:GOOGL)’s ecosystem, with the platform expected to benefit further from potential AI video generation models. Furthermore, the platform remains well-placed to capture linear TV advertising dollars transitioning to Connected TV (CTV). The models are anticipated to fuel further engagement and monetization opportunities. Therefore, YouTube’s dominance in video streaming, YouTube Premium subscription revenues, and YouTube TV’s live offerings are expected to benefit Alphabet Inc. (NASDAQ:GOOGL).

Global video ad spending continues to increase and advertisers are shifting budgets from traditional TV to digital platforms. YouTube, as a result of its strong presence, remains well-placed to capitalize on this growth opportunity. Furthermore, YouTube Shorts has been attracting new advertisers. Qualivian Investment Partners, an investment partnership focused on long-only public equities, released its Q3 2024 investor letter. Here is what the fund said:

“Alphabet Inc. (NASDAQ:GOOGL): Q2 2024 revenues and EPS beat expectations, with total revenues growing 14%, Search ad revenues growing 14%, YouTube ads growing 13%, and Google Cloud revenues growing 29%. Revenue growth in the quarter constituted a continued sequential improvement from earlier quarters in the year, suggesting a continued rebound in Alphabet’s core business except for YouTube ad revenues, which missed expectations and showed deceleration in the growth rate as compared to Q1 when it grew 21%. Operating margins improved by 310 bps vs. the same quarter last year.

Management continued to highlight developments with their generative AI program, which is seen as a foundational platform with opportunities across their businesses but particularly in search and cloud. However, this comes with material capex investment well ahead of the expected economic benefits from Gen AI, and the level of spending is leading investors to worry about the ROI on that spend for Alphabet, as well as the other hyperscalers (Microsoft and Amazon). We continue to have confidence in Alphabet’s ability to generate strong revenue, earnings, and cash flow growth well above the S&P 500’s in the years to come and view it as a core holding for the long term.”