Investing in the right stocks that benefit from secular shifts in consumer behavior can significantly increase your chances of finding a life-changing investment.
On-demand streaming has completely changed the traditional media usage and it is now changing the way people exercise. This is an unstoppable trend that drives the stock performance of Walt Disney (NYSE: DIS), Spotify Technology (NYSE: SPOT), en Peloton Interactive (NASDAQ: PTON).
But the best is yet to come for these three stocks that are driving unstoppable consumer trends.
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1. Disney
Disney shares initially fell sharply earlier last year when the new coronavirus forced the company to temporarily close theme parks, suspend its shipping operations and delay film projects, but the share price was still able to deliver a 19% return over the past 12 months. The House of Mouse entered into a traditional media company in 2020, but by the end of the year it had transformed into a streaming first company, which could ignite a new growth phase for the media juggernaut.
With a deep library of classic movies to keep up with the latest Star Wars-based series The Mandalorian, it did not take long for the Disney + service to become a phenomenon. The service far exceeded initial estimates and the company now plans to have between 230 million and 260 million subscribers by fiscal 2024, bringing the total subscriptions in the Hulu, ESPN + and Disney + services to between 300 million and Should bring 350 million.
Even though it’s a little late for the streaming party, Disney has hit the ground running. WandaVision, a new original series from Marvel Studios, has just been released on Disney +, but there’s a lot more on the way. The company plans to release ten original series of both its Star Wars and Marvel brands, in addition to 15 original series from its Disney and Pixar studios, over the next few years.
Disney plans to increase the monthly subscription fee for Disney + in certain markets as early as March, which will compensate for the increased investment in new content. However, management pointed out that the service could make a profit by fiscal 2024. Investors should consider buying stocks while the direct-to-consumer business is still in the early stages of growth.
Image Source: Getty Images.
2. Spotify
Spotify’s share price has risen 145% since the initial public offering in early 2018. Despite the streaming music platform that is widely used in the US and Europe, Spotify still has tremendous long-term growth opportunity. It continues to enter new markets, most recently in Russia, and continues to expand its offering with exclusive podcast content.
The growth in monthly active users has remained constant over the past few years at around 30%, indicating a large market that Spotify is using. Despite a slowdown in Spotify’s ad-supported service and lower engagement at the start of the pandemic, global consumption hours on the platform have already recovered to pre-COVID levels from the third quarter of 2020.
Spotify believes that there is a significant pent-up demand for 2021. The recent launch in Russia was more successful than management expected, leading the company to believe that there are still many people around the world who would like to try the service.
Investors should also watch Spotify’s push into the podcast market, which has exploded in popularity in recent years. Spotify acquired three companies involved in the production and distribution of podcast content in 2019. A fourth agreement was announced in November with the acquisition of Megaphone, which will improve Spotify’s advertising capabilities.
With the positive short-term engagement trends, coupled with investment in new markets and content, this leading audio streaming platform could boost your portfolio over the next decade.
Image source: Peloton Interactive.
3. Peloton
On-demand remote workouts have been furious lately, and this is largely due to all the Peloton ads on TV. The company has invested large sums to spread brand awareness, and it works.
Peloton has already grown rapidly before the pandemic, with revenues almost quadrupling from fiscal 2017 to fiscal 2019, but Peloton’s momentum has accelerated in recent quarters as more people at home have sought virus-free exercise alternatives.
Revenue rose 232% year-on-year over the past quarter, adhering to its label as the ultimate “stay at home” stock. The growth level is not sustainable in a post-COVID environment, but Peloton is still a small business in relation to its market potential. It included only 1.33 million connected fitness subscribers, or 3.6 million users of the Peloton app, although there are approximately 200 million people worldwide with paid gym memberships.
Peloton has seen a strong customer response to the new Bike + product, and there are certainly opportunities to expand its offering in the long term to new categories, especially products designed for strength training. The recent acquisition of Precor, one of the leading commercial manufacturers of fitness products, should strengthen Peloton’s future plans, given Precor’s capabilities in product design and development.
Peloton has emerged as a leading brand in fitness, and its ability to make home exercise more personal and engaging can expand its responsible market beyond just those who are members of gyms. All that being said, this is a growth stock that you could wish you had bought 20 years from now.