Disney and Roku are popular names in the world of streaming services, but which of these two companies would make the best long-term bet?
In the streaming world, there are two ongoing competitions; who is the best original content streaming service, and who is the best multi-platform streaming player. With Netflix essentially cemented as king of content, Disney (NYSE: DIS) is looking like it might take the runner-up position. In the other race, Roku (NASDAQ: ROKU) competes for the top spot against Google and Amazon. So we ask, which is a better investment, Disney or Roku?
Disney
Whilst the pandemic continues to impact Disney's most-profitable industries, such as Parks and Resorts, the streaming segment of its business is booming.
For 2021, Disney+ is on track to release at least one new episode from its Marvel or Star Wars franchises per week, and whilst this 'archaic' notion might frustrate serial binge-watchers, it actually works to Disney's benefit. Each episode becomes a hot topic for a few days after its release and then the cycle is repeated weekly. This lengthens the staying power of Disney+, compensating for its limited amount of diversified content to keep subscribers paying for the platform.
With 95 million subscribers, Disney is predicted to increase this to 260 million by 2024. This will likely be driven by the new Disney+ Star addition to its streaming platform which gives subscribers access to more mature content, including series such as Atlanta, Scandal, and even Borat.
Disney's most recent quarterly report saw revenue of $16.25 billion, which is up 10% from the previous quarter. However, the year-over-year (YoY) comparison sees a 22% decline. This is understandable as the company saw a 53% decline in Parks, Experiences, and Products sales -- its most prominent revenue source. A decline on this scale has lead to Disney losing billions in revenue over the last year, highlighting its vulnerability. If Disney+ had not been released just a few months before the pandemic hit, the company would have had an even harder time than it already did.
This is a pretty big bear case, one that could lead investors to question how well prepared is Disney if another global disaster were to present itself. On the other hand, as it continues to diversify into streaming, Disney would be a great addition for any long-term investor.
Roku
Roku has been soaring recently, and although it is definitely a player in the streaming world, Roku does not produce original content, nor does it have any plans to do so at present. In fact, Roku provides a brand-agnostic platform upon which its users can find all their favorite streaming services in one place on their TV.
It makes money through the sale of its product and advertisements. In its recent earnings report, Roku closed out Fiscal Year 2020 with a 58% overall increase in revenue YoY to $1.78 billion. Its platform revenue was up 71% YoY with 2020 adding 14.3 million new active user accounts, bringing its total to 51.2 million Roku accounts.
The Roku Channel continues to be a massive hit with users as it provides free live TV, movies, sport, and news. This channel is ad-supported, meaning Roku users get free TV paid for by big corporations, whilst those companies can advertise their products -- a big win for all parties involved. In Q4, usage of this channel grew nearly twice as fast as Roku itself, reaching an estimated 63 million people -- up over 100% YoY.
Roku produces a number of products each year that enhance its user's streaming experience. The Streambar, released earlier this year, won multiple awards internationally including CNET's Best Soundbar-streaming combo, and Top Gadget of 2020 by Unocero in Mexico as well as being recommended by Tech Advisor in the UK.
But Roku is not the only player in this game. Roku faces serious competition from Amazon, as its prices are very similar and the number of Monthly Active users is also reported at over 50 million. Other players include Google's Chromecast and even Apple's Apple TV+. With such big names, Roku faces serious competition.
Aside from that, Roku is a solid, growing business that is currently in the process of making itself an indispensable accessory in the average living room
So, which is a better investment
Disney is a strong, solid bet for any investor who wants an easy investment they can forget about for the next few years. Roku on the other hand will be a good investment for those who like to take a bit more of a risk. Either way, both are a good bet for any investor.
A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free access now!
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
