Winter is here. One major effect is that people end up staying home due to the cold weather. However, this year it's going to be even worse due to the coronavirus.
Health officials believe case counts are going to keep rising as the cold makes the virus more contagious and people are forced to be indoors with many relaxing in terms of masks and social distancing. Many countries have had to reinstitute lockdowns as the situation gets worse. In the US, a national lockdown seems unlikely but it's possible on a local level.
The following three stocks are likely to pop during the long and cold winter ahead: Netflix (NFLX), Spotify Technology (SPOT), and Roku (ROKU).
Netflix (NFLX)
Though NFLX has received some flak for its shows, the controversy is merely a temporary setback. The struggling economy will undoubtedly steer many more customers away from cable toward NFLX. NFLX has held up quite well against a steady stream of new competitors. NFLX has the all-important name-recognition along with an affordable monthly rate and an ever-expanding content library.
Take a look at the NFLX POWR Ratings and you will find the stock has an "A" grade in the Industry Rank component along with a "B" Trade Grade. NFLX is ranked in the top 20 of nearly 60 Internet companies. The top market experts are bullish on NFLX, setting an average price target of $575.44 for the stock. If NFLX hits this level, it will have increased by nearly 18%.
Take a look at NFLX's chart and you will find the stock has a floor around $465. The stock seems to undulate between this floor and the $555 mark. At the moment, NFLX is hovering around its trading floor, meaning this might be a good time to scoop up some shares.
NFLX is making progress toward being free cash flow positive. Furthermore, a second wave of the virus is likely to close movie theaters once again, steering the masses toward home-based NFLX entertainment.
Spotify Technology (SPOT)
Digital music and media are sure to prove even more popular this winter as people are stuck inside amidst nasty weather and the closure of traditional brick-and-mortar spaces due to a second wave of the virus. Even if the majority of venues are not closed, their hours will likely be limited. Furthermore, people simply do not enjoy wearing a mask. The likes of SPOT will benefit from this “perfect storm of sorts”, raking in the cash as people stay inside and resort to affordable entertainment options.
The SPOT POWR Ratings could not be better: "A" grades in the Peer Grade, Buy & Hold Grade, and Trade Grade components. SPOT is the top-ranked stock of more than 10 in the Entertainment - Radio space. The top analysts are bullish on SPOT, setting an average price target of $289.38, meaning it has more than 4% upside.
As the largest subscription platform for music in the world, SPOT is firmly entrenched yet still has plenty of room to grow. The company's paying premium subscribers are up more than 25% compared to this time last year. Though SPOT provides a no-cost service as well, this option includes ads that help the company make money.
Furthermore, SPOT has a nearly 10% stake in Tencent Music, providing invaluable access to the burgeoning Chinese market. SPOT is also implementing advertisements into podcasts based on each listener's unique demographics. This ever-evolving company is deserving of a place in your portfolio before the upcoming winter and beyond.
Roku (ROKU)
ROKU certainly isn’t the most popular at-home entertainment option yet it is quietly succeeding. ROKU makes it easy to stream online content at home. Furthermore, ROKU TVs facilitate streaming with built-in apps. This is an under the radar stock with the potential to soar this winter.
ROKU has fantastic POWR Ratings highlighted by "A" grades in the Buy & Hold Grade, Trade Grade, and Peer Grade components. ROKU is ranked second of 30 publicly traded companies in the Technology - Hardware segment. If you doubt ROKU has bullish potential, consider the fact that nearly 90% of Americans are streaming video content. This trend benefits ROKU. The company will continue to sell that much more digital ad space on its platform. ROKU's digital advertising revenue is up nearly 50% on a year over year basis.
ROKU's active accounts are up more than 40% on a year over year basis. In fact, the company's ad business spiked an incredible 346% across the past year. Look for ROKU to capture even more market share as it's easy to use service attracts that many more people during the long winter ahead.
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Why is the Stock Market Tanking Now?
NFLX shares were trading at $484.44 per share on Thursday morning, down $1.80 (-0.37%). Year-to-date, NFLX has gained 49.72%, versus a 3.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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