However, leading streamers face significant challenges in acquiring new subscribers, as they need to spend vast sums on content generation to retain subscriber growth. Yet, some streamers are better positioned than others to maintain their lead in this competitive industry. Personalized viewing experiences and global accessibility continue to propel streaming platforms forward. As a result, the focus is increasingly on companies in charge of content creation and distribution. With that information, here are the most compelling media stocks to buy in the second half 2024.
Global X Social Media ETF (SOCL)
We start discussing media stocks to buy with the Global X Social Media ETF (NASDAQ:SOCL). This exchange-traded fund offers investors a unique opportunity to tap into the dynamic growth of the social media sector. SOCL aggregates a diverse portfolio of companies that play a key role in shaping online communication, streaming, advertising and media sharing. These businesses are primed to benefit from artificial intelligence (AI), e-commerce and advanced data analytics. These tools are helping management teams create new revenue streams that enhance user interaction and platform development.
The fund, which currently invests in 47 social media stocks worldwide, was first listed in November 2011. Regarding sectoral allocation, communication services shares account for 96% of the fund. Then, we see several names from information technology, consumer discretionary and financial sectors.
The top 10 stocks comprise around two-thirds of $147 million in net assets. Among the leading holdings in the fund are the China-headquartered Tencent (OTCMKTS:TCEHY), Pinterest (NYSE:PINS), Meta Platforms (NASDAQ:META), Naver (OTCMKTS:NHNCF), Kuaishou Technology (OTCMKTS:KUASF) and Snap (NYSE:SNAP).
SOCL is up nearly 10% year-to-date (YTD). Meanwhile, trailing price-to-earnings (P/E) and price-to-book (P/B) ratios stand at 20.2x and 2.4x. Investors who expect global streaming and digital advertising spending to remain strong could consider buying the dip in the SOCL ETF.
Netflix (NFLX)
Next up on our list of media stocks to buy is Netflix (NASDAQ:NFLX). With its pioneering model and continuous innovation, Netflix has maintained its position at the forefront of the streaming wars. The company boasts a massive subscriber base of over 270 million paid memberships across more than 190 countries.
Analysts were pleased with the first quarter fiscal 2024 results, which surpassed expectations, highlighting Netflix’s significant pricing power in the streaming space. Revenue jumped 15% year-over-year (YOY) to $9.4 billion. In addition, Netflix added 9.3 million paid memberships, pushing its global subscriber base to 270 million. Operating income also jumped 54% YOY, while earnings per share (EPS) skyrocketed 83% to $5.28.
Apart from cutting costs, the crackdown on password sharing and introducing an ad-supported tier have effectively monetized its extensive user base and diversified revenue streams. The ad-supported tier delivered 65% quarter-over-quarter membership growth as consumers shifted towards cheaper options to use their streaming services.
Netflix management’s focus on diverse content, strategic international expansions and ventures into new entertainment formats like gaming and live sports make NFLX stock a compelling long-term investment. Management guided robust revenue growth and profitability in fiscal year 2024, anticipating operating margin expansion in the second quarter.
Year-to-date, NFLX stock is up 27%. Yet, shares are priced at a premium valuation of 33.5 times forward earnings and 7.7 times trailing sales. Meanwhile, analysts’ 12-month average price target suggests an upside potential of 6% from current levels.
Spotify (SPOT)
We discuss media stocks to buy with the audio-streaming giant Spotify (NYSE:SPOT). Many on Wall Street concur that the company has redefined digital music streaming, holding more than 30% of the market share in this space.
The audio-streaming company reported solid first-quarter fiscal 2024 results thanks to Spotify’s leadership in audio content. Revenue increased 20% YOY to 3.6 billion euros, driven by an increase in premium subscribers and an effective cost management strategy. Operating margin expanded by 243 basis points, while EPS jumped 162% YOY to 97 euro cents.
Spotify continues to diversify its revenue streams through strategic price adjustments and expansion into new markets. Planned price hikes in key markets and introducing new subscription tiers are expected to boost revenue growth and market share. Meanwhile, Spotify is expanding beyond the North American and European markets. Users outside these core regions account for 54% of total monthly active users.
Improved margins and increased focus on efficiency contribute to Spotify’s robust earnings backdrop in 2024. Analysts forecast strong momentum in premium subscriptions to accelerate earnings growth. Premium subscribers grew 14% YOY in the first quarter to 239 million subscribers worldwide.
SPOT stock has doubled in value over the past year, with a notable 58% increase YTD. As a result, shares command a premium valuation at 59 times forward earnings and 3.8 times trailing sales. Nonetheless, Wall Street still remains optimistic, with an average price target of $352, an upside potential of over 16%.
On the date of publication, Tezcan Gecgil 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.
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.