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Chicago, IL – July 17, 2025 – Today, Zacks Equity Research discusses Netflix NFLX, Roku Inc. ROK and Bilibili BILI.
Link: https://www.zacks.com/commentary/2585868/3-broadcast-radio-tv-stocks-to-buy-from-a-challenging-industry
The Zacks Broadcast Radio and Television industry has been grappling with an escalation in cord-cutting despite a surge in demand for streaming content. However, industry players, such as Netflix, Roku Inc. and Bilibili are reaping the benefits of a massive spike in digital content consumption.
These companies are thriving due to their diverse content offerings, which include original, regional, and short-form content tailored for small screens like smartphones and tablets. Improved Internet speed and penetration, coupled with technological advancements, have been advantageous for industry participants. As monetization and revenues from advertising spending continue to be modest, strategies focused on profit protection, cash management and greater technology integration have gained significance and are expected to aid these companies in driving top-line growth in the near term.
The Zacks Broadcast Radio and Television industry encompasses companies that provide entertainment, sports, news, non-fiction, and musical content across television, radio, and digital media platforms. These entities generate revenues through the sale of television and radio programs, advertising slots and subscriptions.
With technological advancements and a growing demand for virtual reality and Internet radio, industry players are increasing their investments in research and development, as well as sales and marketing efforts, to remain competitive. The industry's focus is likely to shift toward sustaining current levels of operations, coupled with a renewed emphasis on flexibility. This approach would accelerate the transition to a variable cost model, thereby reducing fixed costs and enhancing agility in the face of evolving market dynamics.
Shift in Consumer Preference a Key Catalyst: To adapt to the evolving landscape, companies are diversifying their content offerings for over-the-top (OTT) services alongside traditional linear TV. The availability of streaming services across a wide range of platforms has enabled them to reach a global audience, expand their international user base and attract advertisers to their platforms, thereby boosting ad revenues.
The utilization of services that aid advertisers in measuring their return on investment and enhancing use cases is expected to benefit industry participants. Major leagues and events, such as the NFL, NHL, Olympics, European Games, EPL and elections, also contribute significantly to ad revenue generation.
Increased Digital Viewing Fuels Content Demand: Many industry participants, either launching their own OTT services or acquiring existing ones, leverage user insights to deliver tailored content. The surge in digital viewing has made consumer data readily available, allowing companies to apply artificial intelligence (AI) and machine learning techniques to create or procure targeted content. This approach not only boosts user engagement but also enables industry players to raise the prices of their services at opportune moments without the fear of losing subscribers.
Uncertain Macroeconomic Landscape Impedes Production and Ad Demand: Advertising is a significant revenue source for the Broadcast Radio and Television industry. However, industry participants are grappling with the effects of persistently high inflation, rising interest rates, increased capital costs, a soaring U.S. dollar and the looming threat of a recession.
These factors have prompted advertisers to trim their ad budgets, which is expected to impact the top-line growth of industry players in the near term. Moreover, intense competition for ad dollars from tech and social media companies has been a significant impediment to the growth of industry participants.
Low-Priced Skinny Bundles Impact Revenues: The surge in cord-cutting has compelled industry participants to offer "skinny bundles." These Internet-based services often contain fewer channels than traditional subscriptions and are, therefore, more affordable.
This move aligns with changing consumer viewing dynamics, as growth in Internet penetration and advancements in mobile, video and wireless technologies have boosted small-screen viewing. While these alternative services are expected to keep users engaged with their platforms, increasing the need for additional content, the low-priced skinny bundles are likely to dampen the top-line performance of industry players.
The Zacks Broadcast Radio and Television industry is housed within the broader Zacks Consumer Discretionary sector. It currently carries a Zacks Industry Rank #176, which places it in the bottom 28% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dismal near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry's position in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group's earnings growth potential.
Despite the gloomy industry outlook, a few stocks are worth watching, as these have the potential to outperform the market based on a strong earnings outlook. But before we present such stocks, it is worth first looking at the industry's shareholder returns and current valuation.
The Zacks Broadcast Radio and Television industry has outperformed the broader Zacks Consumer Discretionary sector and the S&P 500 Index in the past year.
The industry has returned 70.9% over this period compared with the S&P 500's growth of 12.1% and the broader sector's appreciation of 24.3%.
On the basis of trailing 12-month Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA), which is a commonly used multiple for valuing Broadcast Radio and Television stocks, the industry is currently trading at 19.39X versus the S&P 500's 17.71X and the sector's 11.27X.
In the past five years, the industry has traded as high as 21.4X and as low as 4.69X, recording a median of 10.36X.
Bilibili: This Zacks Rank #1 (Strong Buy) company presents compelling investment opportunities, driven by strong operational improvements and strategic positioning. The company's first-quarter 2025 results demonstrated remarkable progress with 24% revenue growth to RMB7 billion, a 99% reduction in GAAP net loss to just RMB11 million, and gross profit margins expanding to 36.3% from 28.3% year over year. Gaming revenues surged 76% while advertising revenues grew 20%, with performance-based ads increasing more than 30%. You can see the complete list of today's Zacks #1 Rank stocks here.
The platform's user engagement remains robust with 107 million daily active users spending 108 minutes daily, while monthly paying users reached a record 32 million. Bilibili's dominant position among China's Gen Z demographic, combined with successful cost-cutting initiatives and improving profitability metrics, positions the stock favorably for continued growth as the company approaches its long-term margin targets.
The Zacks Consensus Estimate for 2025 earnings has increased 24.6% to $0.71 per share in the past 60 days. BILI shares have gained 31.7% year to date.
Netflix: Based on Netflix's future projections, the streaming giant presents a compelling investment opportunity. This Zacks Rank #2 (Buy) company has set an ambitious target to double its revenues by 2030 and achieve a $1 trillion market capitalization. Netflix's growth strategy includes expanding its content library, developing live programming options, enhancing its gaming division, and building its advertising business.
These strategic initiatives are expected to drive significant revenue and profit growth in the coming years. The company is still targeting a 29% operating margin for 2025 based on F/X rates as of Jan. 1, 2025. Netflix demonstrates strong financial discipline alongside growth.
The ad-supported subscription tier has become a significant success story for Netflix. According to company data, more than 55% of new subscribers in markets where it's available are choosing the ad-supported option. This has led management to project advertising revenues reaching $9 billion annually by 2030, representing an increasing portion of Netflix's total revenues.
The Zacks Consensus Estimate for 2025 earnings has moved north by 0.5% to $25.45 per share in the past 30 days. NFLX shares have returned 41.1% year to date.
Roku: This Zacks Rank #2 company has been strengthening its position in the U.S. ad-supported streaming market by focusing on platform innovation. The Roku Channel became the #2 app on its platform by engagement in the United States in the first quarter of 2025, driven by improvements to the AI-powered content row that has been boosting viewer engagement, ad reach and subscriptions.
The Home Screen has been reaching more than 125 million people daily, serving as a key launch point for advertisers. Roku's ad partnerships and shoppable formats have been unlocking new monetization avenues. A recent deal with Amazon Ads expanded reach to an estimated 80 million CTV homes. Roku has been investing in new ad products and measurement tools, expected to roll out in the second half of 2025.
The Zacks Consensus Estimate for 2025 earnings has remained steady at a loss of 18 cents per share in the past 60 days. In the year-to-date period, ROKU shares have gained 22.3%.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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This article originally published on Zacks Investment Research (zacks.com).
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