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The streaming revolution has taken many in the entertainment industry by surprise, but just about everyone now realizes that the trend is secular. It’s a must-win business for AT&T (NYSE:T) as AT&T stock continues its lackluster behavior, this is a real opportunity.
So far, the main pure-play has been Netflix (NASDAQ:NFLX), yet the valuation is, well, rich. Consider that the forward price-to-earnings multiple is 62X and the market cap is a hefty $160 billion. During the past ten years, NFLX stock has logged an average return of a sizzling 50.96%!
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But going forward, it could get difficult to gin up these types of gains. This is especially the case since competition is crowding the streaming space, with offerings from Hulu, Alphabet’s (NASDAQ:GOOGL, NASDAQ:GOOG) YouTube, Amazon.com’s (NASDAQ:AMZN) Prime, CBS’s (NYSE:CBS) All Access and so on.
And yes, there are more offerings that will hit the markets in the coming months – from companies like Disney (NYSE:DIS), Comcast (NASDAQ:CMCSA) and Apple (NASDAQ:AAPL).
Kind of crazy, huh? Yep. But it is validation that the market for streaming is real and massive.
So how can investors play this? Actually, I think there will ultimately only be a handful of winners and they will have deep content libraries and pipelines. This is why I’m bullish on DIS, but the same goes for AT&T.
Streaming and AT&T Stock
True, the company has its issues. The debt load is massive. There is also the cord-cutting that continues to plague the DirecTV division. And of course, AT&T stock has been a perennial loser. For the past five years, the average annual return was a meager 3.56%.
Yet despite all this, I think it’s important to keep in mind that AT&T is a much different company nowadays. More importantly, it looks poised to benefit nicely from streaming, which should be a strong catalyst.
All this is due to the gutsy $81 billion acquisition of Time-Warner. Through this, AT&T has created the WarnerMedia division, which has marque assets like a tier-1 studio – which has produced recent hits like Aquaman and A Star is Born – as well as cable properties, such as TNT, TBS, HBO and Adult Swim.
So what about the streaming service? At first, the plan was to create three different offerings. But it looks like AT&T management has nixed this because of the complexity. Instead, it appears there will be one platform that will have a monthly subscription fee of $16 to $17 (this is according to a report in the Wall Street Journal).