The video-streaming scene has been dire in recent quarters. What used to be an incredible innovation in entertainment has now become the boring, old norm, with many media companies itching to move into the modern era and away from traditional television.
At the end of the day, it’s just moving the same content from one medium to another. Further, the technologies behind streaming aren’t all that exciting anymore, given many consumers expect on-demand services alongside their cable subscription packages.
At the end of the day, the move into streaming is just another expense to keep up with the times. Unlike traditional media, streaming also comes with lower switching costs. Unfortunately, many investors are discovering that streaming isn’t nearly as lucrative as it used to be now that media firms have had the chance to catch up.
With an economic downturn on the horizon, the stickiness of various platforms will be tested. Many streaming stocks will crumble under the pressure. Others may have a chance to take share and push into profitability.
In any case, the advent of streaming technology now looks to have been more of a burden than an opportunity for the industry as a whole. After so much damage dealt to the streaming stocks, there may be value to be had in some of the stronger players.
We used TipRanks’ Comparison tool to look at three major players to determine which is worthiest in the eyes of Wall Street.
Netflix is the original video-streamer, and it’s suffered a big fall from grace, shedding around 76% of its value from peak to trough. It’s been an ugly valuation reset for Netflix that’s caused CEO Reed Hastings to pivot to help put an end to the bleeding.
While initiatives such as finding ways to get freeloaders to pay may provide a bit of temporary relief, investors are unlikely to get bullish on the stock again until subscriber growth shows signs of a sustained turnaround. The keyword here is, “sustained.” Until Netflix can pull another rabbit out of the hat in the video-gaming market, it seems unlikely that hit shows such as Stranger Things — or another season of Squid Game — can turn the ship around.
Moving ahead, Netflix needs to continue spending to create quality content, all while rivals look to poach subscribers. With such high capital-spending requirements, now may not be the best time to be a shareholder, as the firm dukes it out with stronger competition in the face of a recession.
Despite all the negatives and lack of catalysts, Netflix is a cheap stock at 16.3 times trailing earnings. It’s no longer the growth play it was, but it can be an intriguing stalwart for value seekers. Perhaps if Netflix can’t get its groove back in the gaming market, it can offer a sizeable dividend.
Wall Street remains bullish, with the average Netflix price target of $283.77, implying 57.48% upside.
Warner Bros. Discovery (WBD)
Warner Bros. Discovery is a newcomer on the block following its spin-off. The company could not have picked a worse time to hit the public markets, as streamers have crumbled in sympathy with Netflix.
Whether or not Netflix is the canary in the coal mine remains to be seen. Regardless, one has to draw a line in the sand somewhere, as the market reassigns new valuations to the streamers.
After plunging over 46% from its April peak, Warner’s media empire now boasts a mere $36 billion market cap. At 7.3 times trailing earnings, the firm behind popular steaming platform HBO Max is starting to get ridiculously cheap.
Warner Bros. Discovery is a great value play with a lot of potential synergies to realize over the years. Still, the company has a lot of debt on the sheets, and until the broader streaming market can see some sort of relief, it seems unlikely that WBD stock will be able to start moving higher again. That ~$55 billion debt load has got to be off-putting for many investors.
Wall Street is staying bullish, with the average Warner Bros. Discovery price target of $32.17, implying 116.63% upside.
Paramount Global (PARA)
Paramount Global, formerly ViacomCBS, is one of the cheapest media firms at writing, with a mere 4.3 times trailing earnings multiple. The $16.75 billion company has shed around 60% of its value over the past five years in what has been a slow and steady tumble into the abyss.
As the company bets big on its Paramount+ service, which enjoyed substantial growth of late, the firm may have the opportunity to take a bit of share away from the likes of Netflix. Still, the company doesn’t have as much firepower to throw at content as its bigger brothers.
In any case, I do view the evolution of streaming as favoring the little guy. If Paramount can deliver a few hit shows, it could find its groove again. Until then, Paramount is a heavy underdog in the streaming space, with one of the most depressed multiples in the markets right now.
Even if Paramount can’t deliver on the quality front, the stock seems to be priced with nothing but pessimism in mind.
Wall Street is bullish, with the average Paramount price target of $33.47, implying a 30.54% upside.
The video-streaming outlook is grim right now. Still, it’s tough to pass up some of the dirt-cheap multiples. Wall Street seems most bullish on Warner Bros. Discovery, with the stock expected to more than double from current levels.
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