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Forget Netflix: This Stock Is the Next Millionaire Maker
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For years, Netflix (NASDAQ: NFLX) has been the darling of the entertainment industry. Its stock price has soared as it’s revolutionized how we consume movies and TV shows. If you invested $1,000 into Netflix at its IPO, you’d have $480,000 today.
That said, Netflix may be undergoing a stock split, which is something to keep in mind if you’re looking to invest. Many also consider them over-valued, especially as more and more companies start to break into the streaming industry. One of these companies is Warner Bros. Discovery (NASDAQ: WBD), a behemoth formed by the recent merger of two entertainment giants.
Despite facing challenges in the streaming industry, Warner Bros. Discovery’s exceptional content library and smart cost-cutting strategies have positioned the company to become a major disruptor in the entertainment industry. This could create substantial value for shareholders. Despite strong competition, WBD’s unique strengths place it for significant growth, potentially offering handsome rewards for investors amid the ongoing streaming wars.
Let’s take a look at why WBD may be the next big millionaire maker in the streaming industry.
Key Points You Need to Know
- Warner Bros. Discovery provides an alternative to investing in Netflix in the streaming space.
- The company is moving quickly to cut costs and could provide stronger earnings in the near future than investors expect.
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The Streaming Industry
The world of streaming is a battleground ruled by big names like Netflix and Disney+ (NYSE: DIS). Netflix has a huge following and is known for its award-winning original shows. Meanwhile, Disney+ has made a big impact with its vast library and strong ties to The Walt Disney Company. Other key players like Hulu and HBO Max (now part of WBD) also pour tons of money into creating and buying content, all in a fierce competition to grab and keep viewers’ attention.
Subscriber churn (the rate at which customers cancel their subscriptions) is a constant, forcing services to constantly update their offerings to justify their ever-climbing price tags. In this environment, risk looms large, but there is also a huge potential for success.
The global streaming market is projected to achieve a 21.5% CAGR by 2030. But what company will take advantage of this growth? Success hinges on possessing a compelling library and implementing strategic cost-cutting measures to ensure profitability.
Warner Bros. Discovery’s Content Powerhouse
Warner Bros. Discovery is stepping into the ring with an impressive content library that can compete with any other company. On the Warner Bros. side, they’ve got top-notch franchises like Harry Potter, DC Comics superheroes (including Batman, Superman, and Wonder Woman), and classic shows like “Friends” and “The Big Bang Theory” that are still raking in revenue through reruns and streaming.
Meanwhile, on the Discovery side, they’ve got a strong lineup of unscripted shows from HGTV, the Food Network, and the Discovery Channel. This mix of scripted and unscripted content covers a wide range of viewer interests, putting WBD in a great position to attract and keep subscribers.
Plus, WBD is constantly bolstering its library with a robust slate of originals. HBO, which is currently under the WBD umbrella, is a powerhouse of critically acclaimed shows like “Succession” and “Game of Thrones.” WBD plans to leverage these shows while creating new originals across genres.
This commitment to fresh content can potentially drive WBD to new heights, especially if they’re able to out-compete other streaming services in this arena. However, content is just one part of the steaming war. The financial realities matter, too.
Strategic Cost-Cutting and Value Proposition
Streaming services are becoming increasingly expensive. Financial sustainability and value are now just as important as the shows available. WBD recognizes this and is constantly trying to implement strategic cost-cutting measures to help streamline operations and keep their streaming service cheaper than others.
After the merger, the company took some serious cost-cutting measures, allowing it to continue offering the same content at a lower price. Plus, they’re also reevaluating content licensing deals. There is the potential for WBD to produce more content in-house with the merger, allowing them to potentially save money.
These cost-cutting initiatives help WBD stay profitable while still offering the same high-quality content. While some streaming services prioritize subscriber growth at any cost, often burning through cash in the process, WBD’s focus on efficiency positions them for long-term financial health.
For investors, this has huge potential as a long-term investment.
Underestimated Potential and Long-Term Growth
Despite its strategic cost-cutting measures, some analysts view WBD’s stock price as undervalued. This tends to occur when two large companies merge together, as investors are momentarily turned-off by the proposition of two companies figuring out how to conglomerate. Integrating operations, corporate cultures, and technology platforms can be a complex and time-consuming process!
However, if you ignore these hurdles for a moment, you can take advantage of the lower stock price.
WBD’s commitment to a strong direct-to-consumer platform, encompassing HBO Max and Discovery+, is a key driver of their future growth strategy. This combined service allows WBD to offer a more diverse content library than many other streaming services, allowing them to provide better value to streamers.
Potential Risk of Investing in WBD
Of course, no investment is without risk, and the streaming landscape is particularly risky. WBD faces many challenges that could lead to it withering instead of growing:
- Competition: The streaming market is fiercely competitive, and WBD isn’t necessarily in a much better condition than Netflix and Disney+. Plus, many other streaming companies have been around for longer, providing them with a larger subscriber base and brand recognition.
- Subscriber Churn: Subscribers are quick to cancel their subscriptions. If WBD stops delivering high-quality content, viewers may churn to other services.
- Content Licensing Costs: Securing rights to popular shows and movies can be expensive. WBD will need to manage these costs effectively to maintain profitability.
- Merger Challenges: Successfully operating after a merger can be challenging and complicated. Unforeseeable difficulties can impact WBD’s performance. In fact, WBD’s stock has tumbled over the last year.
These are just some of the potential difficulties. There are plenty of other potential risks you could bring up! Be sure you consider your risk tolerance when deciding whether or not to invest in any streaming company, as they all tend to be a bit risky!
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