In retrospect, this should have been obvious. After states across the nation began ordering the closure of restaurants to promote social distancing, it was probably inevitable that movie theaters would be next to close.
Close they did, with the announcements going out Monday night and today. And that should have made it obvious which stocks would benefit from the elimination of competition from old-school cinema: streaming stocks.
True to form, shares of the top maker of over-the-top streaming devices, Roku (NASDAQ:ROKU), and the most popular streaming video provider, Netflix (NASDAQ:NFLX), closed trading today up 8.8% and 7%, respectively.
Of course they did: In retrospect, as I say, this was obvious. Roku stock had just finished plunging 21% in Monday trading, and Netflix had just lost 11% that day. With Tuesday's news promising better times ahead for both companies, it was all but inevitable that these stocks would snap back and recover at least some of their losses on Tuesday.
It's this same streaming angle, I suspect, that explains why Lions Gate Entertainment (NYSE:LGF-A) (NYSE:LGF-B) jumped 12.5% in Tuesday trading as well. While best known as a moviemaker, Lions Gate also owns the Starz and Encore movie networks, acquired in 2016. Both are available as streaming services.
As a streaming play, therefore, Lions Gate, too, was due for a bounce back today.
Will it continue bouncing higher, along with Roku and Netflix?
That probably depends on which numbers investors decide to focus on. If still fixated on revenue growth, then Roku, with sales up 52% year over year in the past year, should be investors' clear favorite to continue streaming higher in the days to come. If they insist on profitable revenue, though, Netflix is the only one of these three companies currently reporting profits as calculated according to generally accepted accounting principles (GAAP), while Lions Gate is the only one generating real free cash flow.
Depending on which number investors think most attractive, any of these three companies could turn out to be the next big winner.
Or if we fall into a recession, perhaps none of them will.