Keep Income 'Streaming' in With Disney, Other Entertainment Names

During the height of the pandemic, demand for streaming services exploded, because people literally had no where else to go, but the ability to stream first-run films at home is going to stick. Let me give you an example: Walt Disney finally released its latest installment in the Marvel cinematic universe, Black Widow, and it had a very solid opening, scoring $80 million at the domestic box office and $78 million at the international box office. Disney enjoyed that take, but also revealed that more than $60 million globally from streaming the new film through its Disney+ Premier Access, which carried a $30 ticket on top of the monthly Disney+ subscription. If you want to wait to see it outside of Disney+ Premier Access, you either have to wait until October for it to stream on regular Disney+ or head on over to a movie theater. There is an argument that jibes with the Cash-Strapped Consumer investment theme I recently discussed. For the price of Disney+Premier Access, you can pack as many people in your own home as you want, and stock up on far more affordable snacks than you could when visiting AMC Theaters or Cinemark . This streaming explosion coincides with the proliferation of streaming services from the likes of Apple , Amazon , the aforementioned Disney, and of course Netflix , but more recent entrants including Comcast's Peacock, HBO Max and Paramount+. There is also Chicken Soup for the Soul Entertainment , which owns Crackle Plus, a company formed with Sony Pictures Television, which owns and operates a variety of ad-supported and subscription-based VOD networks including Crackle, Popcornflix, Popcornflix Kids, Truli, Pivotshare, Españolflix and FrightPix. Each of these services are racing to create fresh and proprietary content in order to win the subscriber land-grab and some are using their balance sheet to lend a helping hand. Amazon recently paid $8.45 billion for the film and TV company MGM, a move that is expected to bolster its Amazon Prime Video offering, while reports indicate Apple is looking to bulk up its Apple TV+ by buying Reese Witherspoon's Hello Sunshine media company for close to $1 billion. Further evidence of this content race is had with the buildout of soundstages, which are needed to produce all the shows that are going to stream on these digital channels. Blackstone Group took a 49% stake in three Los Angeles film-studio lots that valued the complex at $1.65 billion and this past May, Bain Capital Real Estate followed, announcing a $450 million soundstage project on Santa Monica Boulevard that would take over an abandoned Sears. What each of these streaming service is search of is content that consumers will not only want to watch, if not binge on, but also move to streaming services for. This plays right into another one of my investment themes: Content Is King. When we think about content companies, the stable of characters had at Disney that spans the various Marvel, Star Wars, and Pixar universes, as well as Disney's own formidable library, makes it a natural go to. AT&T's WarnerMedia has its stable of DC Entertainment staples that it is looking to leverage, Hasbro and several of its own properties including GI Joe, and AMC Networks has its Walking Dead franchise. All of that said, when it comes to monetizing that content Disney is in a class by itself. Arguably coming and going Disney has figured out how to squeeze as much dollars from its cast of characters and other properties across its TV stations, streaming channels, movies, sound tracks, theme parks and gift shops and other merchandise. What many don't realize is at $54 billion according to License Global, Disney is the largest global licensor of intellectual property, head and shoulders over the number four ranked Warner Media and its $11.5 billion. The current Wall Street consensus price target for DIS shares is $207, which offers about 12% upside, and the company is expected to deliver earnings per share of $2.36 and $5.00 per share next year vs. $2.02 in 2020. Those year-over-year gains reflect the fade of the pandemic on its US business, which weighed heavily on its highly profitable theme parks business, as well as a return to normalcy for its other businesses, including the film business. Yet, with the delta variant leading to fresh lockdowns in Europe, we could see a bump in the road ahead for DIS shares should the company deliver softer than expected June quarter guidance. My advice is to nibble on a small amount of DIS shares in the near-term and scale in further following that upcoming earnings report. For those looking for another way to play the continued global rise in streaming, which is expected to deliver a compound annual growth rate (CAGR) of 21.0% from 2021 to 2028, topping $190 billion, consider data centers like Equinix and Digital Realty Trust - those streaming programs have to flow through them to get to the viewer, and the more digital content that gets consumer, the greater the rise data center demand. The kicker is most of the data center companies are REITs, which means as their earnings grow so too do their dividend. (AAPL and Amazon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

Keep Income 'Streaming' in With Disney, Other Entertainment Names

Let's look at DIS and how it fits into the 'Content Is King' investing theme.

Columnist Conversation

This Weekend on Real Money

AAP Podcast: A Tongue -- and a Market -- Twister: 'Get a Debt Deal Done'

Selling Some of This Surging AI-Related Stock

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.