We recently compiled a list of the 12 Best Streaming Service Stocks to Buy According to Analysts. In this article, we are going to take a look at where The Walt Disney Company (DIS) stands against the other streaming service stocks.
The live streaming market size is expected to increase by US$20.64 billion, reflecting a CAGR of ~16.6% over 2024 and 2029, as per Technavio. The significant use of smartphones and constant internet connectivity allows users to easily stream content, resulting in market expansion. Furthermore, technological advancements such as AI and VR continue to enhance user experiences, further bolstering the market’s momentum.
Pivoting to Next-generation Streaming 2.0
After 4 years of experimentation among the legacy global diversified media companies, S&P Global believes that 2025 can be an inflection point in the broader industry’s multi-year transition to streaming from linear TV. The scaling of advertising on streaming is expected to be a critical component for growth in profitability. Most of the streaming services don’t have enough subscribers on ad-tiers to attract advertising dollars, mainly those advertising budgets that are departing linear TV, says the firm.
Mainly for 2025, the firm expects companies to announce international JVs and domestic bundling arrangements. Why? These strategies can help the scaling up of streaming services, manage operating expenses through sharing infrastructure costs (mainly in second-tier international markets), and reduce churn.
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Focusing on Quality and Not Quantity
As per BDO, media companies and those organizations providing streaming services have increased their content libraries in a bid to attract new customers. Over the past few years, several media companies and streaming providers focused on customer attraction, targeting to get as many new subscribers as possible. The streaming platforms continued to churn out new material, resulting in a content boom. Now, the companies are focused on prioritizing customer retention as they reassess the quality of their content to ensure that it addresses demand.
BDO expects that most major streaming platforms are expected to increase their spending on content by less than 10% over the upcoming few years. The broader streaming industry continues to invest in podcasts. However, since the podcast space remains crowded, differentiating new products is expected to remain critical in 2025 to fuel demand.
As the broader sector evolves, media companies and streaming platforms need to revamp their strategies to reap the benefits of opportunities and address challenges, like subscribers sharing credentials and customer retention. BDO opines that these companies are required to look for ways to improve revenues, either by increasing the service fees or adding ad-free tiers.
Our Methodology
To list the 12 Best Streaming Service Stocks to Buy According to Analysts, we sifted through several online rankings and chose companies catering to the broader streaming services sector. Next, we chose the ones that analysts view as Strong Buy stocks and see upside to. Finally, the stocks were arranged in ascending order of their average upside potential, as of February 14. We also mentioned the hedge fund sentiment around each stock, as of Q3 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 packed theater of moviegoers watching a blockbuster film produced by the entertainment company.
The Walt Disney Company (NYSE:DIS)
Average Upside Potential: 17.7%
Number of Hedge Fund Holders: 76
The Walt Disney Company (NYSE:DIS) operates as an entertainment company. Disney+ is available as a standalone streaming service or as part of bundle offerings in the US giving subscribers access to different combinations of Disney+, Hulu, and ESPN+. Morgan Stanley upped the company’s price target to $130 from $125, keeping an “Overweight” rating. Fiscal Q1 outperformance increased its conviction in The Walt Disney Company (NYSE:DIS) delivering on FY 2025 guidance as margins again outperformed.
Morgan Stanley’s bullish view showcases the confidence in The Walt Disney Company (NYSE:DIS)’s ability to accelerate Experiences growth and deliver strong earnings upside from streaming in FY 2025. Elsewhere, analyst David Karnovsky from J.P. Morgan remains optimistic due to a combination of factors which include the company’s unique content and improving streaming financials. Notably, the recent film releases have performed well, which continues to bolster demand for Disney+. Furthermore, the integration of Hulu and ESPN on Disney+ is being lauded by marketers, consumers, and investors alike.
The Walt Disney Company (NYSE:DIS) reported strong growth in streaming profitability, fueled by technological advancements and strategic planning for platforms such as ESPN and Disney+. This success highlights a pivotal shift in the company’s business model, as it remains focused on enhancing its digital offerings. As a result of price hikes, The Walt Disney Company (NYSE:DIS)’s direct-to-consumer (DTC) streaming business, including Disney+ and Hulu, saw a profit of $293 million from a loss of $138 million one year ago.
Overall DIS ranks 6th on our list of the best streaming service stocks to buy according to analysts. While we acknowledge the potential of DIS 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 DIS 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.
