The lack of popular shows in 2018 has pushed streaming companies to the backfoot. Will it be worthwhile to look at streaming stocks Walt Disney DIS, Paramount PARA and Roku ROKU? Continue reading to find out my opinion.
In recent years, people's viewing habits have changed dramatically from traditional television to streaming services. Rapid technological advancements are fueling the growth of streaming platforms, internet penetration and easy on-demand access, as well as a variety of content.
In the streaming market, several players are now vying to dominate a competitive market. Due to the increased competition, it may be prudent to avoid streaming stocks such as The Walt Disney Company, Paramount Global, and Roku, Inc.
Let's first discuss the streaming industry before we dive deeper into these stocks' fundamentals.
Netflix, Inc., which was once undisputed in the streaming industry, saw its share of the market drop by 5.6% on an annual basis to 44.21% during the first quarter fiscal 2023. In the first quarter, streaming traffic has declined by 20.2% on average.
A lack of new hits this year has also led to a slow start on streaming platforms. In the face of high inflation, and consequent pressures on businesses and consumers, streaming platforms are becoming more conservative in their spending. They risk losing customers. It is becoming increasingly difficult for streaming platforms to compete in the market.
Streaming platforms face fierce competition as more companies enter the market and offer similar services. All of these streaming platforms are competing for the same audience. It is difficult for streaming platforms to compete as they have to spend more money on marketing and content to bring in new users.
Investors should avoid the fundamentally weak streaming stocks DIS PARA and ROKU, given the level of competition in the streaming market.
DIS is a global entertainment company. The company operates in two segments: Disney Media and Entertainment Distribution and Disney Parks, Experiences, and Products.
DIS' gross profit margin for the 12-month trailing period is 33.4% less than the industry average of 50.16%. The 14.10% EBITDA trailing-12 month margin is 21.5% less than the industry average of 17.95%. Its 5.75% levered 12-month FCF margin is also 21.4% less than the industry average.
DIS's total segment operating profit for the first three months ended December 31, 2020 decreased 7% from year to year, reaching $3.04 billion. Costs and expenses increased by 9.7% over the past year to $21.52 Billion. Cash used for operations by the company increased 366% over the past year to $974 millions. Cash, cash equivalents, and restricted cash at the end of the period decreased by 41.2% over last year to $8.52 Billion.
Analysts anticipate DIS' EPS to drop 13.9% from the previous year to $0.93 for the quarter ending March 31, 2023. The stock price has dropped 16.1% over the last year to $97.45 at the close of the last trading session.
The POWR ratings of DIS reflect its weak fundamentals. The stock's overall rating is D, which is equivalent to a Sell rating in our proprietary system. The POWR ratings assess stocks based on 118 factors, each of which has its own weighting.
It is ranked 8th out of 14 stocks in the F-rated industry Entertainment - Media Producers. It is rated D for Value, Quality, and Momentum. Also, we have given DIS ratings for Growth, Stability and Sentiment. All DIS ratings are available here.
Paramount Global (PARA),
PARA is a global media and entertainment firm. The company is divided into three segments: TV Media, Direct to Consumer, and Filmed Entertainment.
PARA's gross profit margin for the 12-month period ending in the past is 33.49%, which is 33.2% less than the industry average of 50.16%. The 9.46% EBITDA margin for the trailing-12 months is 47.3% less than the industry average of 17.95%. Its 1.25% CAPEX/Sales ratio is 65.5% less than the industry average of 3.63%.
PARA's revenues for the first three months ended March 31, 2023 decreased by 0.9% from year to year, reaching $7.26 billion. The operating loss was $1.23 billion compared to a profit of $755 millions in the previous quarter.
The company's net income from continuing operations, adjusted for PARA, declined by 82.1% to $72 millions. Additionally, its adjusted earnings per share from continuing operations fell 85% to $0.09.
PARA's earnings per share (EPS) for the quarter ending 30 June 2023 is expected to drop 86% from last year to $0.09. The company's revenue is expected to drop 5.1% to $7.38 Billion in the current quarter. PARA's earnings surprises are not good. It has missed its consensus estimates for EPS in three of the last four quarters.
The stock price has dropped 45.7% in the last year to close at $16.40.
PARA's POWR ratings reflect its bleak prospects. Its overall rating is D, which is equivalent to a Sell. It is ranked #9 within the same industry. It also has a D grade for Growth, Momentum and Stability, as well as an F for Sentiment.
Click here to view the other PARA ratings for Value and quality.
ROKU is a streaming TV platform. The company is divided into two segments: Platform and Devices. The streaming platform lets users find and access TV, movies, sports, news and other content.
ROKU's trailing-12 month EBIT margin of negative 21.75% is compared to the industry average of 812%. The industry average Return on Common Equity is 2.93%. ROKU's negative 24.81% trailing-12 month Return on Common Equity compares to a 2.93% industry average. Its negative 21.23 percent trailing 12-month net income margin is also lower than the industry average of 3.05 percent.
ROKU's operating loss for the first quarter of fiscal 2023 ended March 31st, 2023 increased 804.5% over last year to $212.46 millions. The net loss of the company increased by 636% over the past year to $193.60 millions. The company's net loss per common share increased by 626.3% over the past year to $1.38.
Its adjusted EBITDA was also a loss of $69.08 million compared to a adjusted EBITDA value of $57.58 millions. ARPU also declined by 5% to $40.67.
ROKU's earnings per share for the quarter ending 30 June 2023 is expected to be negative. The stock price has dropped 52% in the past 12 months, closing the last trading day at $52.79.
This negative outlook is reflected in ROKU's Powr Ratings. Its overall rating is F, which in our proprietary system translates into a Strong Sale.
It is ranked 52 out of 53 stocks in the Consumer Goods sector. The stock is rated D for Growth, Value Momentum, Stability Sentiment and Quality. Click here to view all of the POWR ratings for ROKU.
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DIS shares traded at $98.70 on Friday morning. This was up $1.25 (+1.28%). DIS shares have gained 13.60% year-to-date compared to the S&P 500 benchmark index's 7.93% increase during the same time period.
Malaika Alphonsus is the author
Malaika's love of writing and her interest in the financial markets led to a career as an investment researcher. She has a degree from the University of Economics and Psychology and hopes to help investors make informed decisions.