The industry is witnessing a mixed bag of fortunes in the dynamic world of online streaming. Though industry bellwethers such as Netflix continue to shine, its competition is struggling, with many of them evolving into streaming stocks to sell.
Moreover, certain streaming platforms are struggling remarkably in terms of their financials, with gross margins and revenue growth falling short of industry averages. This is a telling sign of underlying operational inefficiencies and a challenging market environment. Additionally, reliance on specific demographics can backfire in broader economic shifts, impacting advertising revenues and growth prospects.
Therefore, savvy investors should consider the potential benefits of reallocating resources away from faltering streaming stocks, thereby mitigating risks and focusing on more lucrative prospects. In this context, it’s imperative to identify the three streaming stocks that are currently underperforming and are prudent sells at this time.
Disney (NYSE:DIS) has been grappling with a series of setbacks, painting a gloomy picture for its investors. Disney’s recent struggles in its entertainment offerings are evident, especially with the disappointing performance of the latest Marvel film. It lost more than $1 billion on four flops alone last year, as Disney struggles to adapt to the shifting preferences of consumers.
Furthermore, Disney+ Hotstar experienced a crippling loss of 12.5 million subscriptions, driven by a shift away from low-margin customers and the loss of key sports rights in the region. Moreover, its fourth-quarter report highlighted several challenges for the entertainment giant, particularly with Disney+.
Despite an increase in subscriptions, the service faces major issues including a $387 million loss in its streaming segment, a 9% decline in linear networks revenue, and a focus on cost reductions, including a $7.5 billion savings target.
This upheaval highlights a significant market instability. In the past year, DIS shares have plummeted by 11.5%, underscoring the negative sentiment surrounding the stock. These issues cast uncertainty over Disney’s future, prompting investors to exercise prudent discretion with DIS stock.
The company’s half-hearted approach to its $500 million share repurchase program, spending a mere $53.6 million, reflects a concerning disregard for bolstering shareholder confidence. Additionally, the absence of dividend payouts further exacerbates investor unease.
Financially, Bilibili’s situation is precarious. The company reports a trailing twelve months gross profit margin of only 22.54%, starkly contrasting the sector’s median of 49%. This, coupled with consistently unprofitable revenues, underscores deep-seated inefficiencies. Its recent quarterly performance, missing the mark with non-GAAP earnings per share of -29 cents and a flat revenue of $795.7 million, further highlights its struggles.
Moreover, Bilibili’s reliance on a younger audience is backfiring amid rising youth unemployment, potentially diminishing its advertising allure. This demographic dependency, once a strength, now questions the company’s future growth prospects.
Paramount (NASDAQ:PARA), renowned for its streaming services, faces a steep 36% year-over-year (YOY) stock decline. This downturn stems from its struggling TV Media segment, which has failed to offset losses from the pandemic-driven cord-cutting.
Despite efforts to boost its unprofitable streaming division, Paramount’s financials remain shaky. The company’s forward revenue growth is a mere 3.10%, lagging 21% behind the sector median of 3.9%. Moreover, its gross profit margin stands at 32.48%, significantly trailing the sector’s 49% median. These figures underscore Paramount’s precarious position in a rapidly evolving industry.
Furthermore, recent rumors of a possible ownership shuffle have ignited fervent market buzz. However, this heightened chatter has inflated stock values, elevating the risk for potential investors. Additionally, lingering doubts about the worth of Paramount Global’s content library and its profit-generating potential intensify the acquisition’s uncertainty. Although Paramount’s other assets like CBS, Showtime, and BET might lure potential buyers, shedding these holdings will be a time-intensive and costly endeavor.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines