Netflix, Inc. (NASDAQ:NFLX) partnered with Dreamworks Animation Skg Inc (NASDAQ: DWA) to develop its first original television series mainly for children. According to the company, the series Turbo: F.A.S.T. will be about the adventures of a snail that becomes super-speedy after a freak accident. In December, 26 episodes will be available to Netflix customers after the theatrical release of a Turbo film by DreamWorks in July. The new agreement is an extension of the earlier agreement entered in 2011 to offer films for kids such as Kung Fu Panda and How to Train Your Dragon. The other original series that are expected to be released in 2013 are Orange Is the New Black created by Jenji Kohan, a thriller Hemlock Grove and comedian Ricky Gervais’s Derek.
According to Jeffrey Katzenberg, the Chief Executive Officer of DreamWorks Animation, “Netflix boasts one of the largest and fastest-growing audiences in kids’ television. They pioneered a new model for TV dramas with House of Cards, and now together, we’re doing the same thing with kids’ programming.”
Reed Hastings, the Chief Executive Officer of Netflix, is trying to undertake big financial bets to protect the company’s future as the prevailing streaming-video service as the number of viewers moving online is increasing. He also said that the company’s efforts such as House of Cards and the revived Fox comedy Arrested Development strengthened its relationships in Hollywood and assisted in fighting off its competitors such as Amazon.com, Inc. (NASDAQ: AMZN).
Amazon has also planned five pilots for original children’s shows and once they are completed, viewer’s choice will be determined to ascertain which one should be converted into a full-length series to operate on its streaming services in Germany, the US and the UK.
According to Scott Devitt, an analyst with Morgan Stanley, the company is focusing on creating a subscriber base that is less likely to cancel for competing offerings. The company is looking for Sony rights, declined to remark on whether it was outbid for the films.
Valuation
Let’s check if any of these stocks are attractively priced:
| Ticker | Company | P/E | P/S | P/B | P/FCF | D/E | EPS Growth Next 5 Years |
| CSTR | Coinstar | 11.6 | 0.68 | 2.81 | 5.87 | 0.7 | 17.6% |
| DTV | DIRECTV | 12.06 | 1.02 | NA | 12.05 | NA | 15.8% |
| LGF | Lions Gate Entertainment | 71.45 | 1.09 | 14.59 | 13.12 | 5.01 | 21.9% |
| DISH | Dish Network | 21.27 | 1.11 | 146.21 | 9.05 | 95.18 | 4.8% |
| CMCSA | Comcast | 18.22 | 1.72 | 2.17 | 14.57 | 0.79 | 16.6% |
| AMZN | Amazon.com | NA | 1.97 | 14.71 | 305.43 | 0.38 | 40.6% |
| DWA | DreamWorks Animation | 20.57 | 2.05 | 1.05 | NA | 0.14 | 11.0% |
| SJR | Shaw Communications | 14.31 | 2.13 | 2.74 | NA | 1.31 | 6.2% |
Coinstar is the only stock that should attract investors at current prices. It’s not meeting expectations, but it is really cheap. Unfortunately, DIRECTV has a negative book value for owner’s equity, which is not a good sign for future returns. The next cheapest stocks by the price-to-sales ratio are Lions Gate and Dish, and these are overleveraged.
Industry shake ups are exciting, but they are just another risk for investors to consider. Only Coinstar is appropriately priced as a speculative bet while other names on this list should be avoided.
The article Uncertainty Weighs Heavily On Streaming Investors originally appeared on Fool.com and is written by Bill Edson.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
