Investing in the right stocks that are benefiting from secular changes in consumer behavior can significantly increase your chances of finding a life-changing investment.
On-demand streaming has completely transformed traditional media consumption and is now changing the way people exercise. It is an unstoppable trend that is driving the performance of Walt Disney (NYSE: DIS), Spotify technology (NYSE: SPOT)and Peloton Interactive (NASDAQ: PTON).
But the best is yet to come for these three actions that follow unstoppable consumption trends.
Image source: Getty Images.
1. Disney
Disney shares fell sharply at the beginning of last year, when the new coronavirus forced the company to temporarily close theme parks, end its cruise operations and delay movie projects, but the stock price still managed to deliver a 19% return in the past 12 months. House of Mouse entered 2020 as a traditional media company, but by the end of the year, it had become a streaming company first, which could start a new growth phase for the media juggernaut.
With a vast library of classic films to accompany the new blockbuster Star Warsseries based on The Mandalorian, it didn’t take long for the Disney + streaming service to become a phenomenon. The service far exceeded initial estimates and the company now projects that it will reach between 230 million to 260 million subscribers by fiscal year 2024, which should bring total subscriptions on its Hulu, ESPN + and Disney + services to between 300 million and 350 million.
Even though it’s a little late for the streaming party, Disney has started running. WandaVision, a new original series from Marvel Studios, recently launched on Disney +, but there’s more to come. The company plans to launch 10 original series of its Star Wars and the Marvel brands, in addition to 15 original series from their Disney and Pixar studios, over the following years.
Disney is already planning to increase the Disney + monthly subscription fee in certain markets as early as March, which will offset the increased investment in new content. But management has advised the service to make a profit by fiscal 2024. Investors should consider buying shares while the consumer-facing business is still in the early stages of growth.
Image source: Getty Images.
2. Spotify
Spotify’s stock price has risen 145% since the initial public offering in early 2018. Although the music streaming platform is already widely used in the United States and Europe, Spotify still has a tremendous opportunity for long-term growth. It is still entering new markets, most recently in Russia, and continues to expand its offering with exclusive podcast content.
The growth of monthly active users has remained consistent at around 30% in recent years, pointing to a huge market that Spotify is exploring. Despite a slowdown in the service supported by Spotify ads and less involvement in the beginning of the pandemic, the hours of global consumption on the platform have already recovered to pre-COVID levels in the third quarter of 2020.
Spotify believes there is significant pent-up demand towards 2021. The recent launch in Russia has been more successful than management expected, leading the company to believe that there are still many people around the world eager to try the service.
Investors should also watch Spotify’s momentum in the podcast market, which has been exploding in popularity in recent years. Spotify acquired three companies involved in the production and distribution of podcast content in 2019. A fourth deal was announced in November with the acquisition of Megaphone, which will increase Spotify’s advertising capacity.
With positive trends in short-term engagement, coupled with investment in new markets and content, this leading audio streaming platform can rock and roll your portfolio in the next decade.
Image source: Peloton Interactive.
3. Peloton
Remote on-demand exercises are in fashion these days, thanks in large part to all those Peloton ads on TV. The company has invested large sums to spread brand awareness and is working.
Peloton was already growing rapidly before the pandemic, with revenue almost quadrupling from fiscal year 2017 through fiscal year 2019, but Peloton’s momentum has accelerated in recent quarters as more people sought virus-free exercise alternatives at home.
Revenue increased 232% year-over-year in the last quarter, living up to its definitive “stay home” label. This level of growth is not sustainable in a post-COVID environment, but Peloton is still a small company in relation to its market potential. It has just 1.33 million connected fitness subscribers, or 3.6 million, including users of the Peloton app, although there are about 200 million people worldwide with paid gym memberships.
Peloton saw a strong customer response to the new Bike + product, and there are certainly opportunities to expand its offering to new long-term categories, especially products designed for strength training. Its recent acquisition of Precor, a leading commercial fitness products manufacturer, is expected to support Peloton’s future plans, given Precor’s resources in product design and development.
Peloton has emerged as a leading fitness brand, and its ability to make home workouts more personalized and engaging could expand its affordable market beyond just those with gym memberships. That said, this is a growing stock that you would like to have bought 20 years from now.