It’s now apparent that the streaming wars are over, and Netflix (NASDAQ:NFLX) has emerged victorious. One point supporting this is that studios owned by rival streaming firms, such as HBO, are selling significant amounts of content to Netflix. Another piece of evidence is that Netflix is very profitable, generating operating income of $6.95 billion last year. Meanwhile, all of the other major streaming companies are still in the red. Moreover, the other owners of streaming channels own cable channels that are continuously being hurt by the cord-cutting trend. In light of these issues, investors should immediately unload the shares of all streaming channels other than Netflix. More specifically, here are three streaming stocks that are the best contenders to sell.
Warner Bros. Discovery (WBD)
Warner Bros. Discovery (NASDAQ:WBD) seems to have little hope of meeting its financial goals by lifting its streaming channels’ subscriber base. This is evident by the company looking to attain its targets through layoffs and price hikes. With many U.S. consumers now reportedly looking to save money, this move is likely to ultimately lower its subscriber base. In the long-run it seems like there is a high possibility it will undermine its financial performance.
Similarly, the company’s decision to either greatly reduce or eliminate its broadcast of NBA games will save it money in the short-run. But, is likely to greatly lower its ad revenue and subscriber base in the longer run. As a result, this decision will probably significantly lower its top and bottom-lines eventually.
Last quarter, Warner Bros. Discovery’s top line dropped 7% year-over-year, excluding currency fluctuations. Meanwhile its EBITA, excluding currency fluctuations and other items, tumbled 20% year-over-year.
Paramount Global (PARA)
Sony (NYSE:SONY) and Apollo Global (NYSE:APO), a private equity firm, are reportedly considering buying Paramount Global (NASDAQ:PARA). But given the weaknesses of Paramount’s streaming and cable businesses, I doubt the companies will wind up paying a premium over the stock’s current levels. Moreover, CNBC recently reported that Sony may decide not to go through with the deal.
Also boding badly for PARA stock, Warren Buffett slashed his ownership of the name to 7.5 million shares last quarter from 63.3 million shares previously. The move shows that the Oracle of Omaha has little faith in the streaming firm going forward. Buffett recently noted that he lost quite a bit of money on the shares.
Paramount’s revenue actually increased 6% in Q1 YOY, but it still generated an operating loss of $417 million.
Disney (DIS)
Disney’s (NYSE:DIS) streaming business is still not profitable as the unit lost $18 million last quarter. And, it was $659 million in the red over the 12-month period that ended in March.
On the positive side, the firm’s flagship Disney+ streaming channel added a net total of 6 million subscribers last quarter. And, the firm expects its streaming business to finally become profitable in its fiscal Q4.
But the streaming business is unlikely to meaningfully boost the conglomerate’s overall profitability for years. The firm’s overall revenue rose an anemic 1% YOY last quarter as the top line of its entertainment division fell 5% YOY.
Cost cutting caused the company’s cash provided by operations to jump 13% last quarter to $3.67 billion, but Disney probably won’t be able to keep reducing its spending much more going forward.
Given its low revenue growth and unimpressive outlook, DIS stock has a high forward price-earnings ratio of 21.6 times. As a result, Disney definitely remains one of the streaming stocks to sell.
On the date of publication, Larry Ramer did not hold (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