We recently published a list of 7 Best Streaming and TV Stocks To Invest In. In this article, we are going to take a look at where Spotify Technology S.A. (NYSE:SPOT) stands against other best streaming and TV stocks to invest in.
Consumer Behaviour Around Streaming Choices
Almost all streaming services hiked up their rates and drove subscription prices high in 2023. However, cost is not the biggest factor for consumers while they stream. As of today, the price of streaming services doesn’t affect loyalty to an entertainment provider as it did in the past. Amdocs’ “The New Streamer 2024” report revealed that consumers are expecting improved experiences with rising costs. According to consumers, original content is the top feature that makes a subscription worthy. Other leading factors include access to older titles, new content every few weeks, and being able to watch anywhere.
Trends Shaping the Streaming Industry
Forbes reported that streamers have been victims of long-term challenges related to profitability and subscriber growth. To counter these issues while catering to evolving consumer demands, streamers are opting for ad-supported plans. With almost half of the younger generation open to seeing more ads, this is a potential way to boost revenue.
Streamers are also trying to score exclusive agreements and partnerships with sports leagues as live sports has become a hot commodity in streaming. Simultaneously, the cost of original content comes at reduced profitability. Against this, the potential solution is a consolidation of streaming platforms to allow access to deeper libraries of content for consumers without compromising on their priority of having original content on their plate. Additionally, cloud gaming is being integrated into streaming services considering 70% of Gen Z appears to be interested in it.
On October 18, Ben Silverman, Propagate Content Chairman & Co-CEO, appeared on CNBC giving examples of the aforementioned streaming industry trends. Commenting on the robust Q3 earnings for streaming giant Netflix, he said that its success would lead to more consolidation among the traditional media players in the smaller streamer space. The company is increasingly investing in original content, sports content, and gaming, something that will continue to reward the company as it expands its profits as well as businesses. While it has the money from its streaming business to make those investments back into streaming, many players in the streaming space do not have the same capabilities. Comcast also has the ability to sell a lot of WiFi and has many other businesses that can drive investment in the content business. He mentioned the telecommunications and media firm’s acquisition of NBCUniversal becoming an engine for the whole company. In the views of Silverman, more troubled are the companies that are pure-play so they need to either consolidate to get to scale or be acquired by the bigger players in the future.
Additionally, Silverman emphasized how sports acquisitions are the key drivers to advertising and not just the drivers in the ability to scale an audience at once. For instance, The streaming giant will be live-streaming two of the 2024 season’s NFL games on Christmas Day. Previously in July, NBCUniversal and the NBA announced an 11-year agreement for NBC, Peacock, USA Network, Sky Sports, and Telemundo to present NBA and WNBA regular-season and playoff games starting in the 2025-26 season.
Our Methodology:
In order to compile a list of the 7 best streaming and TV stocks to invest in, we sifted through ETFs, the Yahoo Finance stock screener, the Finviz stock screener, and online rankings to create an initial list of stocks. Moving on, we shortlisted the top 7 stocks from our list which had the highest number of hedge fund holders. The 7 best streaming and TV stocks to invest in have been arranged in ascending order of their hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A person wearing headphones listening to an audio streaming service.
Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fun Holders: 88
Spotify Technology S.A. (NYSE:SPOT) is known for providing audio streaming services worldwide. The platform launched in 2008, moved into podcasting, and brought a new generation of listeners to the medium. Spotify made its way into the next audio market primed for growth with the addition of audiobooks in 2022.
Spotify serves as the most popular audio streaming subscription service globally with over 626 million users, including 246 million subscribers in over 180 markets. Other than boasting a robust list of premium plans globally, the firm is introducing new subscription plans to give subscribers more listening choices with options like the Audiobooks Access and Basic tiers. Subscribers can now access more than 6 million podcasts, 250,000 audiobooks, and almost the world’s whole music catalog.
Spotify Technology S.A. (NYSE:SPOT) recorded a good Q2 with healthy subscriber gains, record profitability, and improved monetization. Total revenue grew 20% year-over-year to €3.8 billion and operating income finished at a record high of €266 million. Monthly active users grew 14% and premium subscribers grew 12%, year-over-year. Spotify also unveiled new experiences by expanding video podcast catalog to over 250,000 shows, introducing a new Basic plan in Australia, the UK, and the US for ad-free music listening without audiobook listening time, and incorporating over 250,000 audiobook titles into its Premium offering in Canada, Ireland, and New Zealand.
The firm’s recent quarter marked three consecutive quarters of profitability. Spotify remains a good deal by giving access to all of the content that would normally cost a user approximately $26 in the US, which is significantly more than a Spotify subscription. While Spotify Technology S.A. (NYSE:SPOT) has a strong penetration and broad awareness in developed markets, the firm has huge potential to attract a mass of new users in its developing markets.
Overall, SPOT ranks 3rd on our list of best streaming and TV stocks to invest in. While we acknowledge the potential of SPOT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than SPOT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.