The digital entertainment industry is a rapidly evolving sector shaped by advancements in streaming technology, increasing global internet penetration, and rising consumer demand for on-demand content. So, quality streaming stocks Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX), and Roku, Inc. (ROKU), which are capitalizing on these trends, introducing innovative solutions to meet the dynamic preferences of global audiences, might be ideal buys now.
The increasing consumption of online content and subscriptions to video streaming platforms are driven by the convenience and variety they offer. Additionally, the rise of remote work and rapid technological advancements are boosting the prospects of digital entertainment platforms.
Current trends in the U.S. suggest that consumer engagement with over-the-top (OTT) services will soar to an impressive 254.2 million people this year.
Further, the growing popularity of subscription-based models and the integration of interactive features have significantly influenced the industry, driving the expansion of streaming platforms and digital content consumption. Additionally, the rise of smart devices and enhanced connectivity has made digital entertainment more accessible than ever.
In 2024, the global online entertainment market size was estimated at approximately $101.82 billion and is projected to grow at a CAGR of 12.8% between 2024 and 2034, reaching $338.96 billion.
Considering these conducive trends, let’s examine the Digital Entertainment stocks in detail.
Amazon.com, Inc. (AMZN)
AMZN operates globally through its retail, advertising, and subscription services. It is a major player in the entertainment sector, driven by its diverse portfolio that spans streaming, digital media, gaming, and entertainment services. As the parent company of Amazon Prime Video, it offers a broad library of movies, TV shows, and original content, alongside premium offerings like sports events through Amazon Prime Sports. Amazon also invests heavily in gaming, particularly through its ownership of Twitch, a leading live-streaming platform for gamers.
AMZN’s revenue has grown at a CAGR of 10.6% over the past three years and its operation income has risen at a CAGR of 28.9% over the same time frame.
On December 9, AMZN and Intuit Inc. (INTU) announced a multi-year partnership to support Amazon sellers with Intuit’s AI-driven platform, offering financial management tools, compliance support, and capital access. This collaboration aims to provide sellers with insights into profitability, cash flow, and tax liabilities to drive business growth.
On December 5, AWS (Amazon Web Services) and Poolside announced a multi-year partnership to integrate Poolside's generative AI Assistant into Amazon Bedrock, enabling enterprises to customize AI tools for software development with their data while leveraging AWS’s secure and scalable infrastructure.
During the fiscal third quarter that ended September 30, 2024, AMZN’s total net sales increased 11% year-over-year to $158.88 billion. Its operating income grew 55.6% from the year-ago value to $17.41 billion. In addition, the company’s net income and EPS came in at $15.33 billion and $1.43, up 55.2% and 52.1% over the prior-year quarter, respectively.
Analysts expect AMZN’s EPS and revenue for the fourth quarter ending December 31, 2024, to increase 47.3% and 10.2% year-over-year to $1.47 and $187.24 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters, which is promising.
Over the past year, the stock has gained 54.3% to close the last trading session at $225.04. It soared 48.1% year-to-date.
AMZN’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
AMZN has an A grade in Sentiment and a B in Growth, Momentum, and Quality. It is ranked #14 out of 52 stocks in the A-rated Internet industry.
Beyond what we have stated above, we also have given AMZN grades for Value and Stability. Get all the AMZN’s ratings here.
Netflix, Inc. (NFLX)
NFLX delivers a diverse range of entertainment products, including TV series, documentaries, feature films, and games, catering to audiences across various genres and languages.
NFLX’s revenue has grown at a CAGR of 9.5% over the past three years and its operation income has risen at a CAGR of 13.9% over the same time frame.
On December 3, NFLX and Domino's Pizza (DPZ) teamed to promote the upcoming Squid Game season two by offering free Emergency Pizza for a year to low-scoring players at Squid Game: The Experience.
During the fiscal third quarter that ended September 30, 2024, NFLX’s revenue increased 15% year-over-year to $9.83 million. Its operating income grew 51.8% from the year-ago value to $2.91 million. In addition, the company’s net income and EPS came in at $2.36 million and $5.40, up 41% and 44.8% over the prior-year quarter, respectively.
Analysts expect NFLX’s EPS and revenue for the fourth quarter ending December 31, 2024, to increase 100.1% and 14.8% year-over-year to $4.22 and $10.14 billion, respectively. It surpassed the Street revenue estimates in each of the trailing four quarters.
Over the past year, the stock has gained 98.6% to close the last trading session at $913.35. It soared 87.6% year-to-date.
NFLX’s POWR Ratings reflect strong prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
NFLX has a B grade in Quality. It is ranked #19 out of 52 stocks in the Internet industry.
Beyond what we have stated above, we also have given NFLX grades for Growth, Value, Momentum, Stability, and Sentiment. Get all the NFLX’s ratings here.
Roku, Inc. (ROKU)
ROKU operates a TV streaming platform, offering digital advertising and streaming services through its Platform segment and selling streaming players, Roku TVs, and smart home products through its Devices segment.
ROKU’s revenue has grown at a CAGR of 15.2% over the past three years and its total assets have risen at a CAGR of 3.2% over the same time frame.
On October 9, ROKU and Instacart expanded their partnership to make TV moments shoppable, offering CPG advertisers interactive ads, better targeting, and closed-loop measurement while delivering personalized shopping experiences to consumers.
ROKU’s total net revenue increased 16.5% year-over-year to $1.06 billion in the fiscal 2024 third quarter that ended on September 30, 2024. Its total gross profit came in at $480.1 million, up 30.2% year-over-year, while its free cash flow grew 56.1% from the year-ago value to $157.35 million.
Street expects ROKU’s revenue for the fiscal fourth quarter (ending December 31, 2024) to increase 16.1% year-over-year to $1.14 billion. Its EPS for the same quarter is expected to grow 23.4% from the prior year. In addition, it surpassed the consensus revenue estimates in each of the trailing four quarters.
Shares of ROKU have gained 41.4% over the past six months to close the last trading session at $81.82.
ROKU’s bright prospects are apparent in its POWR Ratings.
The company operates within the Consumer Goods industry and is ranked #44 out of 56 stocks.
Click here to see ROKU’s ratings for Growth, Value, Stability, Sentiment, Momentum, and Quality.
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AMZN shares rose $0.21 (+0.09%) in premarket trading Wednesday. Year-to-date, AMZN has gained 48.11%, versus a 28.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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