Top 3 High-Growth Media Stocks to Watch: NFLX, DIS, NWSA
The U.S. media landscape is changing fast-mostly because of a shift to digital platforms, mobile consumption, and subscription-based models. In the E&M sector, global revenue rose 5% in 2023 to $2.80 trillion.
Here are high-growth media stocks that investors may want to track: Netflix, Inc. (NFLX), The Walt Disney Company (DIS), and News Corporation (NWSA).
A recent Forbes survey revealed that 99 percent of U.S. households now subscribe to at least one streaming service. People spend nearly three hours and nine minutes each day consuming digital media. Such figures demonstrate the dominance of streaming platforms as an integral part of modern entertainment consumption.
Overview of High-Growth Media Stocks
In addition, OTT services are becoming extremely popular, and it is estimated that by this year, 254.2 million Americans will use OTT platforms. Compared to live TV, what OTT content gives cannot be equated because viewers get the convenience of enjoying their favorite shows and movies on mobile devices, desktops, tablets, and more.
While online media consumption grows, media and entertainment revenues are likely to exceed $3.4 trillion by 2028 with a CAGR of 3.9%. Additionally, driven by growing internet penetration across consumers, the online entertainment market will build up to $674.56 billion in four years.
Moving on with all these positive trends in sight, let’s get to know the primary fundamentals of the above-discussed high growth media stocks in detail. Here we go,
Netflix, Inc. (NFLX)
NFLX is the entertainment company that provides streaming entertainment services consisting of television and documentaries, feature films, as well as a wide range of different varieties of games across multiple genres and languages. The company allows its members to stream any content through whatever internet-enabled device could be TV, digital video players, set-top boxes, and mobile devices.
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NFLX’s trailing-12-month EBIT margin is at 23.82%, which is a rise of 158.6% from its industry average at 9.21%. In the same way, net income and levered FCF margins for the stock stand at 19.54% and 55.22%, respectively, as compared to their industry averages at 2.95% and 8%.
For the second quarter of fiscal 2024 ended June 30, NFLX’s revenues increased by 16.7% year over year to $9.56 billion. Its operating income rose 42.5% from the prior year’s value to $2.60 billion, keeping an operating margin of 27.2%. In addition, its net income and EPS were $2.15 billion and $4.88, respectively. The respective increases were 44.3% and 48.3% year over year.
Estimated EPS stood at $5.11 for the third quarter, ending September 2024, with a 37.1% increase from the same period last year. Estimates for revenues in the current quarter have been pegged at $9.77 billion, which would be up 14.3% from the same period a year ago. Revenues beat estimates of the three of the last four quarters.
NFLX’s EBITDA and net income have grown at CAGRs of 13.1% and 17.3%, respectively, for the last three years, while EPS has seen an increase at a 18.3% CAGR during this period.
The stock rose 58% over the year as it ended its last trading session at $686.80.
POWR Ratings reflect strong fundamentals in NFLX. In our proprietary rating system, the company has a total POWR Rating of B, or a Buy, calculated across 118 factors, each weighted differently.
It has an A grade for Quality and a B for Sentiment. Among 53 stocks in the B-rated Internet industry, it is ranked #19. Click here to see the other ratings of NFLX for Growth, Value, Momentum, and Stability.
Disneyland Resort, Inc. (DIS)
DIS is a global diversified entertainment company. The firm operates through three segments; Entertainment, Sports, and Experiences. The business focuses on creating film and television video streaming content under different brands that include ABC Television Network, Disney, Freeform, FX, Fox, National Geographic, and Star brand television channels.
The company also has a stock trailing-12-month net income margin of 5.31%, which is an impressive 79.9% above the industry average of 2.95%. Further, its trailing-12-month ROCE and ROTA of 4.82% and 2.41% are 46.7% and 96.8% above the industry averages of 3.29% and 1.23%, respectively.
DIS’s total revenue rose 3.7% from the same period last year to $23.16 billion in the third quarter that ended June 29, 2024. At the segment level, operating income grew 18.7% from the year-ago value to $4.23 billion. Attributable net income and EPS were $2.62 billion and $1.44 compared with a net loss of $460 million and $0.25 per share last year in the same quarter.
Street says DIS’ revenue and earnings per share in the fourth quarter (ended September 2024) should have risen 5.5% and 35.9% year over year to $22.41 billion and $1.11, respectively. Another positive factor is that the company has beaten consensus EPS in each of the last four quarters.
Similarly, the company’s EBITDA and net income have noted strong past three-year CAGRs of 29.8% and 61.9% respectively. Likewise, its EPS has increased at a 62.4% CAGR over the same period.
DIS’s shares have gained 6.7% over the last year to close the last trading session at $89.30.
DIS’ ranking is expressed in its POWR Ratings. It carries a grade of B for Growth and Sentiment. In the 12-stock Entertainment – Media Producers industry, it ranks #7.
To view more POWR Ratings of NWSA for Value, Momentum, Stability, and Quality.
News Corporation (NWSA)
NWSA is a global media and information company that specializes in spreading interesting content and products across consumers and businesses. The company has six business segments, namely Digital Real Estate Services; Subscription Video Services; Dow Jones; Book Publishing; News Media; and Others.
The stock’s asset turnover ratio over the trailing 12-month period is 0.60x, which translates to 20.5% above the industry average of 0.50x. Additionally, its ROTA at 1.59% over the trailing 12-month period translates to 29.9% above the industry average of 1.23%.
Revenues of NWSA increased year-over-year by 5.9% to $2.58 billion during the fourth quarter, which closed June 30, 2024. The company also reported a 11.4% increase in total segment EBITDA from a year ago at $380 million. The adjusted net income for the company came at $99 million or 25.3% more than last year’s figure. In addition, the adjusted EPS of the company came at $0.17 or 21.4% higher than last year.
Analysts are anticipating NWSA to post revenue growth of 2.9% y/y in Q2 (end of December 2024) to $2.66 billion, while its estimate for earnings per share in the same quarter is $0.28, which represents growth of 5.8% from the year-ago quarter. The surprise history is nice, and it has outgrown the consensus in three consecutive quarters out of the last four quarters.
Its revenue and EBITDA have risen at CAGRs of 2.5% and 5.6% for the last three years, while its EBIT has risen by a CAGR of 9.1% during the same time frame.
The stock has soared by 24.7% in the last one year to close for the last trading session at $25.96.
No wonder NWSA has a B grade overall, equivalent to our Buy rating in the proprietary rating system. It also sports a B in Growth and ranks first within the Entertainment – Media Producers industry.
Mentioned above are the POWR Ratings for NWSA. It also has Value, Momentum, Stability, Sentiment, and Quality grades for NWSA, as well. All ratings for NWSA are available here.
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NFLX shares traded at $690.54 Friday morning, adding $3.74 (+0.54%). YTD, NFLX is up 41.83%, compared with a 18.80% gain in the benchmark S&P 500 index more than this time last year.