When it comes to the dominant player in the streaming landscape, Netflix (NASDAQ: NFLX) surely takes the crown. With over 260 million subscribers, Netflix thrives as the only major profitable streaming service in the U.S. Its versatility as a pure-play streaming company sets it apart from legacy media companies transitioning from linear TV to streaming.
However, in the stock market, size doesn’t always equate to superiority. The burning query arises – is Netflix the paramount streaming stock to own at present? Let’s delve into this dilemma with insights from the Motley Fool Research team.
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The Current State of the Streaming Industry
A recent streaming survey from The Motley Fool reveals a growing sense of exhaustion with streaming entertainment and a slowdown in industry growth. The survey reflected that 62% of participants believe that the market is saturated with an excess of streaming options, culminating in an arduous quest for content and the necessity to subscribe to multiple services to access popular shows and events like Thursday Night Football exclusive to Prime Video.
Respondents expressed declining interest in adding new streaming services, with 46% signing up for more services than the previous year and 37% reducing their subscriptions. The most prevalent grievances highlighted the desire for consolidated show availability, the struggle to keep track of content across platforms, and the exorbitant costs of accessing desired content.
Roku: One to Watch
Following its fourth-quarter earnings disclosure, Netflix flaunts its robust performance, having amassed a record 13.1 million subscribers. Despite this, there’s a lingering apprehension gripping streaming customers regarding the addition of new services, implying a potential ceiling on Netflix’s subscriber growth. Additionally, the survey unveils a possible zero-sum game scenario, where the growth of one service comes at the expense of another.
Although Netflix appears poised to outperform the market, the spotlight shifts to a potentially stronger contender – Roku (NASDAQ: ROKU). As the leading streaming distribution platform in the U.S. with over 75 million active accounts, Roku addresses many of the respondents’ concerns. By offering a global search functionality, Roku bridges the gap across multiple services, thereby creating a single platform feel and simplifying content tracking.
Furthermore, with the marked weariness towards accumulating additional streaming services, investors are likely to identify more potential in Roku, equipped to streamline the streaming experience while reaping the benefits of increased viewing time without necessitating extra subscriptions. Roku’s strategic positioning to capitalize on the surge in ad-based streaming further adds to its allure, especially considering its take of 30% of advertising inventory from streaming partners.
What’s more, Roku stands at the cusp of an inflection into profitability, buoyed by a rebound in advertising demand and several rounds of layoffs. Factoring in U.S. streaming preferences, Roku emerges as the premier streaming stock to consider for investment at present.
Before committing $1,000 to Roku stock, ponder this:
The Motley Fool’s Stock Advisor analysts have singled out what they believe are the 10 best stocks for investors to buy at present, and Roku is conspicuously absent from the list. These 10 stocks are anticipated to yield substantial returns in the foreseeable future.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon, Netflix, and Roku. The Motley Fool has positions in and recommends Amazon, Apple, Netflix, and Roku. The Motley Fool has a disclosure policy.