We recently put together a list of the 10 best internet content stocks to buy. In this article, we will look at where Netflix, Inc. (NASDAQ:NFLX) is one of the best Internet content stocks.
According to Grand View SurveyThe value of the global market for digital content creation was $25.6 billion by 2022 and is expected to grow at a CAGR of 13.5% between 2023 and 2030. By 2023, North America dominated the digital content market. The main drivers are the increasing use of social media and the digital change occurring in various sectors. According to a survey by Kepios, 62.3% of people around the world use social media. As of April 2024, the average daily usage is 2 hours and 23 minutes according to this study. Kepio’s analysis shows that the number of people using social media has grown significantly during the first three months of 2024, and annual growth rates are still significantly above 5%.
Content creation is also being transformed by artificial intelligence. According to Custom Market Insights, the global market for AI-powered content creation was valued at $2.3 billion in 2024 and is expected to grow at a compound annual growth rate of 7.7% to $7.9 billion by 2033. Furthermore, AI programs such as GPT -4 are used to generate images, music and text. Gartner predicts that 30% of all digital content will consist of artificial intelligence by 2025. This facilitates hyper-personalization, allowing material to be personalized for specific consumers while streamlining the content creation process.
Secondly, the popularity of short video footage is skyrocketing and has become a major trend in the content production industry. Platforms like Instagram Reels and TikTok have paved the way for this movement. According to a HubSpot survey, 85% of marketers expect short videos to be the most successful type of social media content by 2024. The snackable aspect of this format makes it ideal for capturing the attention of increasingly volatile internet consumers.
Third, digital content is expected to become more interactive in the future. Advances in virtual reality (VR) and augmented reality (AR) offer greater possibilities for immersive experiences. According to a report by PwC, the AR and VR market is expected to reach $1.5 trillion by 2030.
Looking more broadly, there are some significant growth prospects in the sector, which is expected to reach $3.4 trillion by 2028, according to PWC’s Global Entertainment & Media Outlook 2024-2028. Despite ongoing unrest and the need to reinvent business models, the sector offers significant income opportunities. Growth is expected to be driven by advertising, with spending expected to reach $1 trillion by 2026 due to connected TV and internet advertising. Due to market saturation, streaming services are being forced to explore ad-supported business models and creative content. Gaming revenues are predicted to exceed $300 billion by 2028, especially in Asia Pacific. The industry is still booming. Companies that need to orient themselves to changing market dynamics will find more opportunities in fast-growing regions and market categories.
Methodology:
We searched Internet Content ETF holdings and online rankings to form an initial list of 20 Internet Content stocks. We then selected the 10 stocks that were most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds with stakes in them, as of the second quarter of 2024.
Why are we interested in the stocks that hedge funds invest in? The reason is simple: our research shows that we can outperform the market by imitating the best stock picks from the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating the benchmark by 150 percentage points. (see more details here)
Netflix, Inc. (NASDAQ:NFLX)
Number of hedge fund investors: 103
Netflix, Inc.’s business strategy (NASDAQ:NFLX) is quite simple, with just one activity: streaming. It has the largest television entertainment subscriber base in the US and all other markets, with more than 275 million customers worldwide. Almost every country in the world, with the exception of China, has access to it. The company has focused on offering documentaries, films and episodic television on-demand, but has never provided live programming or sports content.
The company recently started offering ad-supported membership choices, giving it exposure to the advertising sector in addition to subscription payments, which historically accounted for almost all of its revenue. The ad-supported version was selected by 45% of new signups last quarter.
In the first half of 2024 alone, Netflix, Inc. (NASDAQ:NFLX) added a net 17.4 million new members, increasing its total subscriber base to 277.7 million in 190 countries. The stock is therefore up 50% YTD.
Netflix has created many highly rated series that are exclusive to its platform and have attracted a substantial audience. Since the streaming provider generates more revenue than its competitors, it is more likely that the company will continue to create content with the goal of attracting and retaining subscribers.
RiverPark Large Growth Fund stated the following about Netflix, Inc. (NASDAQ:NFLX) in its Q1 2024 investor letter:
“Netflix, Inc. (NASDAQ:NFLX): NFLX was a top contributor in Q1-24, following strong Q4 earnings and 2024 guidance on better-than-expected subscriber additions (+13.1 million vs. estimates of +8.9 million). The company’s subscriber growth continued to accelerate following the company’s crackdown on password sharing and the rollout of its lower-cost, ad-supported subscriber offering known as the Ad Tier. ARPU was below expectations, but recently announced price increases in the US, UK and France showed signs that ARPU would increase. NFLX guided operating margins to 24% in 2024, ahead of prior guidance of 22-23%, and guided to free cash flow of $6 billion in 2024.
The recent renewed acceleration in subscriber growth, plus price increases for premium memberships and a stabilization of content investments, should position the company for low double-digit annual revenue growth in the coming years, while improving operating margin to more than 25 % should increase. We also believe that the stabilization of content spend should enable the company to continue to scale its FCF.”
Netflix benefits financially from its strong market share as the leading streaming TV service in the world.
Ken Fisher’s Fisher Asset Management is the largest stakeholder in the company of the funds in Insider Monkey’s database. The company owns 4,357,952 shares worth $2.941 billion in the second quarter.
Generally NFLX is in 5th place on our list of the best internet content stocks to buy. While we recognize the potential of NFLX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns in a shorter time frame. If you’re looking for an AI stock that’s more promising than NFLX but trading at less than five times its earnings, check out our report on the Cheapest AI Stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley And Jim Cramer says NVIDIA ‘has become a wasteland’.
Disclosure: None. This article was originally published on Insider Monkey.
