Two Streaming Leaders Poised for Long-Term Growth: Why Netflix and Roku Are Worth Holding onto for the Next Decade
Netflix and Roku are two of the most prominent streaming leaders in the market, with an excellent track record of delivering strong financial results and a significant potential for future growth. Despite facing increasingly intense competition from new entrants into the streaming space, both companies have demonstrated their ability to thrive and continue to deliver above-average returns to investors.
The Bull Thesis for Netflix and Why It's Still Worth Buying
One company with an exceptional track record is Netflix, with its impressive financial results demonstrating its resilience in a crowded market. In its most recent quarter, Netflix reported a 12.5% year-over-year increase in revenue, hitting $10.5 billion. This significant growth was accompanied by a 25% jump in earnings per share and a 24.5% rise in free cash flow to $2.7 billion. These results were achieved despite rising competition from other streaming services.
The company's ability to continue delivering such outstanding financials has sparked renewed enthusiasm among investors. One major factor contributing to its success is the word-of-mouth effect, which sees Netflix's subscribers enthusiastically recommending shows and films to their friends, creating a self-sustaining cycle of growth. This phenomenon highlights the long-term prospects for the company, pointing toward sustained revenue growth over the next decade.
The streaming industry still has ample unused potential, with estimates suggesting a $650 billion opportunity that dwarfs its current trailing-12-month revenue of $40.2 billion. While achieving 10% of this total addressable market may present challenges, it's clear that Netflix is well-positioned to capture a significant share of the market and continue growing for years to come.
Analyzing Roku: Why Long-Term Investors Should Ignore the Current Red Ink
Another streaming stalwart is Roku, which boasts an attractive hub for advertisers looking to target consumers. Its broad platform gives users access to all major streaming services, allowing them to reach vast audiences by leveraging Amazon's demand-side ad platform to combine their advertising offerings.
Despite encountering some headwinds, including a slowdown in ad spending and declining average revenue per user, Roku has demonstrated resilience by increasing its revenue by 16% year over year to around $1 billion in the first quarter. The company reported 35.8 billion streaming hours, representing a significant increase from the previous year.
Roku's unprofitability for now doesn't overshadow its long-term potential. It is making progress towards profitability and demonstrates value through partnerships like the agreement with Amazon that allows advertisers to reach a combined audience of over 80 million households in the U.S. This strategic move highlights not only Roku's strength as an ecosystem but also their resilience against competition.
Over time, Roku should benefit financially due to its focus on international markets, where it is still increasing its presence and user base before ultimately delivering significant returns. With a current share price of around $56 per stock and a total addressable market potential, long-term investors have reason to believe that their bet will pay off over the next decade.
Why You Should Consider Investing in These Two Stocks
In conclusion, despite their impressive achievements, Netflix and Roku are expected to continue delivering above-average returns due to their leadership positions within the streaming industry. This projection is grounded in both companies' consistent ability to perform well against intense competition and grow at a good clip throughout the next decade.
Both stocks offer value for investors with $5,000, who can purchase multiple shares based on current prices. Investors should seize this opportunity today to build wealth over the long term.
Final Thoughts
It's worth highlighting that our expert team has issued rare "Double Down" stock recommendations for companies on the cusp of significant growth, such as Netflix in 2004 and Apple in 2008. The benefits of investing early with these recommendations are evident from the impressive returns achieved by investors who followed their advice.
Considering the next decade's potential for both Netflix and Roku, our team highly recommends investing today to capitalize on their growth prospects and increase your wealth significantly over the coming years.
Conclusion
Netflix and Roku are positioned favorably for a substantial number of reasons. Both companies have already demonstrated exceptional resilience in the face of intense competition, offering investors excellent long-term returns.
Despite some short-term challenges, including ongoing price hikes at Netflix and red ink on its financial statements due to investments in growth opportunities like international markets expansion by Roku, we firmly believe that these stocks will continue to attract millions more viewers over time.