Two Powerful Streaming Stock Investments Suggested by Wall Street for Purchase in 2025
Revamped Perspective on Spotify and Netflix
Streaming titans Spotify (SPOT -1.56%) and Netflix (NFLX 1.43%) continue their dominance in 2024. Spotify ascended by an impressive 140%, with Netflix following close behind at 83%, both companies reaching new record highs. Wall Street's financial analysts project steady growth for both enterprises in 2025, solidifying their market lead.
Shining Spotlight on Spotify
Spotify is the undisputed leader in music streaming, boasting a global market share of 31.7%, outperforming its nearest competitor, Tencent, with 14.4%. Although the music streaming market is remarkably congested with similar content catalogs, successful differentiation lies in offering unique user experiences, lesser prices, or additional content types.
Spotify's strategic investment in artificial intelligence (AI) plays a significant role in creating a distinct user experience. AI is used to power Spotify's recommendation engine, learning each listener's preferences. Moreover, AI enables the generation of AI Playlists, allowing users to discover tunes based on location, activity, or emojis.
Beyond music, Spotify has analyzed numerous growth opportunities and quickly seized the chances to lead. Its offering includes the second-largest selection of podcasts and an expanding audiobook catalogue.
By the end of Q4 2024, Spotify anticipates generating $16 billion in revenue—a 17% jump from 2023—and Wall Street's consensus forecast suggests an even more impressive $18.4 billion in 2025. The company's successful journey includes delivering $795 million in net profit amidst the first three quarters of 2024, a substantial improvement compared to the $476 million loss during the same period in 2023.
A total of 38 analysts covering Spotify stock share a bullish stance, with 22 recommending a buy, six in overweight, and eight in hold. The remaining two analysts are cautious, suggesting an underweight rating. Despite this cautious stance, they have an optimistic long-term outlook, forecasting a $495 stock price by December 2025.
However, the argument is not without reservation. Spotify stock trades at a price-to-sales (P/S) ratio of 5.8, a significant premium compared to its historical average of 3.8. This high valuation encourages investors to exercise discipline and hold for a minimum of five years to maximize profitability, as the company aims to boost monthly active users (MAU) to 1 billion by 2030.
Unfolding Netflix's Story
Pioneering streaming giant Netflix has a staggering 282.7 million paying subscribers, outpacing its nearest competitor, Disney Plus, by a wide margin. In September 2024, Netflix introduced an advertisement-supported tier, which has since driven half of new sign-ups, targeting customers on tighter budgets.
The introduction of live programming also contributed to Netflix's success, as events such as 'The Roast of Tom Brady' and the Mike Tyson vs. Jake Paul boxing fight attracted attention. This expansion also extended to NFL Christmas Day games, providing an additional 26.5 million U.S. viewers each.
For the fourth quarter of 2024, Netflix expects to report revenue of $38.9 billion, marking an impressive acceleration in growth compared to the 6.6% growth experienced in 2023.
Analysts tracking Netflix have a bullish consensus, with 55 referencing the stock, 25 recommending buys, seven investors suggesting to overweight, and 19 to remain neutral. One analyst has adopted a bearish stance and three have suggested selling. However, their average price target is $850.19—lower than the current stock price.
Netflix primarily gains from its current P/E ratio of 49.8—significantly higher than the broader technology index. However, this does not signify that Netherflix stock is overrated or an investment misstep. Instead, investors could anticipate holding onto the stock for several years to benefit from potential growth.
- Investors looking to diversify their portfolios might consider purchasing Spotify shares, given the company's ambitious goal of boosting its monthly active users (MAU) to 1 billion by 2030, which requires a long-term perspective.
- The financial success of Spotify is reflected in its robust revenue growth, with an anticipated $16 billion in Q4 2024 and a projected $18.4 billion in 2025, showcasing the potential for substantial returns for investors.
- In the realm of finance, Spotify's strategic investment in artificial intelligence (AI) has set it apart from competitors by offering personalized recommendations and AI Playlists, appealing to users seeking unique experiences.
- In 2025, Spotify's stock price is predicted to reach $495 by December, according to the optimistic outlook of analysts covering the company, representing a potential for significant financial gain for investors holding onto the shares.