Profit from Changing TV Trends: 2 Stocks to Ditch and One to Buy for Max Profits

Stock Market

The amount of video streamed by Americans surged 21% last year to an equivalent of 21 million years. What’s more, total TV consumption was little changed in 2023 versus 2022. So obviously, the amount of time spent by Americans watching traditional TV fell by about 21%. And since advertisers tend to follow consumers, the trend suggests that streaming channel ad dollars will rise going forward, while the ad sales of conventional TV stations will sink. This is leading to investors re-examining which TV stocks are best to buy and sell.

Meanwhile, the trend of Americans giving up their cable subscriptions is intensifying. In last year’s third quarter, for example, 889,000 cable TV customers gave up their service. That marked an all-time record high for any Q3 in history. In light of these trends here are three TV stocks to consider, one to buy and two to sell.

Alphabet (GOOG,GOOGL)

Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) has become a major beneficiary of the streaming era as its YouTube offering is thriving tremendously.

Last quarter, YouTube’s ad revenue soared 15.5% year-over-year (YOY) to $9.2 billion. Also noteworthy is that the website’s subscription revenue for all of 2023 came in at $15 billion, up from $3 billion in 2019. The subscription dollars generated by the cable alternative are starting to positively move the needle for GOOG stock.

Meanwhile, on March 22, investment bank Wedbush added GOOG stock to its Best Ideas List, citing the firm’s opportunities in AI and its massive user base. Further, the bank views GOOG as a non-cyclical “winner within the digital advertising industry with broad exposure and durable market share of overall media spending.”

Wedbush increased its price target on the name to $175.

Charter Communications (CHTR)

Source: Piotr Swat / Shutterstock.com

Cable TV provider Charter Communications (NYSE:CHTR) was the fourth-worst performer on the S&P 500 from the start of 2024 through March 25. During that period, CHTR stock sank 25%.

Fueling the decline was the company’s Q4 results. In the report, the firm noted that the number of customers using its internet service had fallen by a net total of 61,000. And, the number of consumer households using its cable TV service had dropped by 7% YOY to 13.5 million. On the bottom line, the firm’s net income tumbled 11.5% versus the same period a year earlier to $1.06 billion, while its revenue inched up just 0.3% to $13.7 billion.

With its two largest businesses shedding users, Charter’s outlook appears to be rather bleak.

Warner Bros. Discovery (WBD)

Source: Jimmy Tudeschi / Shutterstock.com

Warner Bros Discovery’s (NASDAQ:WBD) main assets consist of cable TV stations and a struggling streaming service. Consequently, I’m not at all surprised that WBD stock was the third-worst performer on the S&P 500 from the start of 2024 through March 25. During that period, WBD stock sank 25.6%.

In January, investment bank Redburn Atlantic cut its rating on WBD stock to “neutral,” citing worries about industrywide cable TV ad revenue. According to the bank, this revenue stream is at a negative tipping point.

Redburn predicted that WBD’s EBITDA would come in 8% below mean estimates between 2024 and 2027.

Last quarter, WBD’s top line dropped 7% YOY to $10.2 billion, while its EBITDA, excluding certain items, retreated 5% YOY to $2.5 billion. The latter metric also came in about 10% lower than analysts’ average outlook.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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