What happened
In the midst of a far-reaching market rally on Wednesday, a subset of stocks shot even higher. Disney (DIS -0.93%) climbed as much as 4.7%, Roku (ROKU -1.60%) jumped as much as 8.9%, and fuboTV (FUBO -3.45%) surged as much as 12%. As of 3:04 p.m. ET, the trio were still trading higher, up 4.2%, 7.1%, and 7.6%, respectively.
While there was little in the way of company-specific news for the threesome, it appears the catalyst that sent these stocks surging was positive earnings results by Netflix (NFLX -2.52%). The streaming pioneer also enjoyed a stock price rebound, with its shares recently up 6.7%.
So what
Netflix has assumed the role of bellwether for the streaming space, with investors looking to the company for hints of overall strength or weakness within the industry. After the market close yesterday, Netflix revealed that it lost 970,000 subscribers in the second quarter. While that might not seem like something to write home about, it was far better than the loss of 2 million subscribers the company had forecast. Perhaps more importantly, Netflix sees a return to growth and is expecting to add 1 million subscribers in the third quarter.
At the same time, Netflix generated revenue of $7.97 billion, which was in line with analysts' consensus estimates of $8 billion, while earnings per share (EPS) of $3.20 easily outpaced expectations of $2.95.
Investors took this as evidence that -- for the streaming video industry, at least -- the sky was not falling.
When Netflix reported its first-quarter earnings back in April, the company shed 200,000 subscribers, the first such loss in a decade. While that loss was entirely the result of exiting its business in Russia, the broader slowing trend was clear. Netflix stock was battered, losing 35% on the day following its results. Other players in the streaming video space sold off that day as well, though the declines were much less pronounced. Disney, Roku, and fuboTV stocks tumbled 5.6%, 6.2%, and 6.4%, respectively, in the wake of Netflix's earnings release.
Now what
It's important not to put too much stock in the performance of a rival company, particularly since in most cases it's an apples-to-oranges comparison. These results help highlight the differences.
When Disney reported its fiscal second-quarter results in May, it had a very different experience than Netflix, adding 7.9 million streaming subscribers, up 33% year over year. Furthermore, Disney's direct-to-consumer segment -- which includes Disney+, ESPN+, and Hulu -- generated $4.9 billion, just 25% of its total revenue, while still operating at a loss. The lion's share of Disney's revenue and profits still come from other segments of the company's vast media empire, including its theme parks and blockbuster movies. Given its optionality and the breadth of its business, Disney stock is a buy.
Roku is a horse of a different color. The company boasts the industry-leading streaming platform, and it too generated growth, though somewhat slower than recent history. The company added 1.1 million incremental accounts to its platform during the quarter, bringing the total to 61.3 million, up 14% year over year.
Its business was hamstrung on several fronts. Supply chain disruptions left Roku's namesake streaming devices in short supply, while simultaneously crimping sales of connected TVs using the Roku operating system. This one-two punch slowed growth, but the decline should be short-lived. Additionally, Roku is selling at less than 4 times forward sales, its cheapest valuation in in five years, making it a screaming bargain at these prices.
For its part, fuboTV released its first-quarter results in May, adding nearly 46,000 subscribers, bringing its total to 1.36 million. The company's sports-centric streaming platform experiences significant seasonality, further skewing the value of comparisons to other streaming players. fuboTV might provide a runway for growth, though the niche market opportunity might afford more limited returns.
For all their differences, these streaming players have one thing in common: the massive opportunity that remains. The global streaming video market is expected to grow from $473 billion in 2022 to $1.69 billion by 2029, a compound annual growth rate of nearly 20%, according to Fortune Business Insights.
Each of these players gives investors a way to profit from the secular trend toward streaming -- but given their very different businesses, judging one by the performance of another would be a mistake.
