The increasing demand for digital content among consumers, growing internet penetration, and rising adoption of low-latency video streaming platforms have propelled the prospects for the streaming services market. The rising prevalence of impressive technologies like Gen AI further supports this trend.

Given this backdrop, investors could consider fundamentally sound entertainment stocks Apple Inc. (AAPL), Netflix, Inc. (NFLX), and The Walt Disney Company (DIS) to watch for now.

In today's digital generation, where the internet is easily accessible, digital media consumption is surging rapidly. In a recent survey, it was discovered that 99% of all U.S. households pay for at least one or more streaming services. Also, notably, Americans spend about three hours and nine minutes a day on streaming digital media.

These consumption figures and growing demand have resulted in rigid competition among different media companies offering streaming services.

Besides, the global video streaming market is projected to grow to $2.66 trillion by 2032, exhibiting a CAGR of 18.7%. The market is currently driven by increasing demand for video-on-demand (VoD) streaming services, improving internet connectivity, and the popularity of social media platforms.

With these favorable trends in mind, let’s delve into the fundamentals of the three top entertainment stock choices mentioned above.

Apple Inc. (AAPL)

AAPL designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories globally. The company provides iPhone, Mac, iPad, wearables, home, and accessories including AirPods, Apple TV, Apple Watch, Beats products, and HomePod.

On September 9, AAPL introduced breakthrough sleep and hearing health features for its Apple Watch® and AirPods Pro® 2 to help customers support their sleep and hearing health for several medical conditions. The Hearing Aid feature helps make access to hearing assistance easier for the users.

The new technology will strengthen AAPL’s customer support, contribute to user well-being, and establish the company as a leader in health-focused technology.

On the same day, AAPL launched a new lineup of AirPods® models and features. The new AirPods 4 are the most advanced and comfortable headphones AAPL has created, offering an open-ear design, which comes in two distinct models: AirPods 4 and AirPods 4 with Active Noise Cancellation (ANC).

The company also introduced iPhone® 16 Pro and iPhone 16 Pro Max, featuring Apple Intelligence™, larger display sizes, new creative capabilities with innovative pro camera features, and stunning graphics for immersive gaming, and more, all powered by the A18 Pro chip.

AAPL’s total net sales increased 4.9% from the year-ago value to $85.78 billion during the third quarter that ended June 29, 2024. Its operating income increased 10.2% year-over-year to $25.35 billion. The company's net income and EPS came in at $21.45 billion and $1.40, reflecting 7.9% and 11.1% growth from the prior year's quarter, respectively.

Analysts expect AAPL’s revenue for the fourth quarter (ended September 2024) to grow 5.3% year-over-year to $94.21 billion. The company’s EPS is expected to increase 9.4% year-over-year to $1.60 for the same period. Moreover, the company surpassed the consensus revenue and EPS estimates in all of the trailing four quarters.

Shares of AAPL have surged 34.3% over the past six months and 30.6% over the past year to close the last trading session at $226.80.

AAPL’s bright prospects are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has an A grade for Quality. Within the Technology - Hardware industry, AAPL is ranked #20 out of 42 stocks.

Click here to access additional ratings of AAPL for Value, Momentum, Growth, Sentiment, and Stability.

Netflix, Inc. (NFLX)

NFLX is an entertainment services provider. The company provides TV series, documentaries, feature films, and games across various genres and languages. It also allows its members to receive streaming content through a host of internet-connected devices, including TVs, digital video players, TV set-top boxes, and mobile devices.

NFLX’s trailing-12-month EBIT margin and net income margin of 23.82% and 19.54% are 151.7 % and 530.6% higher than the respective industry averages of 9.32% and 3.10%. Likewise, the stock’s trailing-12-month levered FCF margin of 55.22% is significantly higher than the industry average of 8.04%.

During the second quarter, which ended June 30, 2024, NFLX’s revenues increased 16.7% year-over-year to $9.56 billion. Its operating income grew 42.5% year-over-year to $2.60 billion. The company’s net income and EPS were $2.15 billion and $4.88, up 44.3% and 48.3% from the prior year’s quarter, respectively.

In addition, the company’s total assets stood at $49.10 billion as of June 30, 2024, compared to $48.73 billion as of December 31, 2023.

Analysts expect NFLX’s revenue for the third quarter (ended September 2024) to increase 14.3% year-over-year to $9.76 billion, while its EPS for the same quarter is expected to grow 37.1% year-over-year to $5.11. Also, NFLX has topped the consensus revenue estimates in each of the trailing four quarters.

NFLX’s shares have gained 16.6% over the past six months and 91% over the past year to close the last trading session at $719.70.

NFLX’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has an A grade for Quality and a B grade for Sentiment. Within the A-rated Internet industry, NFLX is ranked #17 among the 52 stocks.

In addition to the POWR Ratings we’ve stated above, we also have NFLX ratings for Stability, Momentum, Value, and Growth. Get all NFLX ratings here.

The Walt Disney Company (DIS)

DIS is a global entertainment company. The company operates through three segments: Entertainment; Sports; and Experiences. It produces and distributes film and television video streaming content under banners like ABC Television Network, Disney, Freeform, FX, Fox, National Geographic, and Star brand television channels.

DIS’ trailing-12-month net income margin of 5.31% is 71.2% higher than the industry average of 3.10%. Further, the stock’s trailing-12-month EBIT margin and levered FCF margin of 12.93% and 9.19% are 38.7% and 14.4% higher than the industry averages of 9.32% and 8.04%, respectively.

For the third quarter that ended June 29, 2024, DIS’ total revenue increased 3.7% year-over-year to $23.16 billion. Its total segment operating income increased 18.7% from the year-ago value to $4.23 billion. Also, net income attributable to DIS was $2.62 billion, against a net loss of $460 million during the prior year's quarter.

Furthermore, the company’s cash and cash equivalents and total assets stood at $5.95 billion and $197.77 billion as of June 29, 2024, respectively.

Street expects DIS’ revenue and EPS for the fourth quarter (ended September 2024) to increase 5.9% and 35.8% year-over-year to $22.49 billion and $1.11, respectively. Also, the company topped the consensus EPS estimate in all four trailing quarters, which is remarkable.

Shares of DIS have surged 5.9% over the past month and 20% over the past year to close the last trading session at $95.15.

DIS’ POWR Ratings reflect its sound fundamentals. The stock has a B grade for Sentiment and Growth. It is ranked #6 out of 12 stocks within the Entertainment – Media Producers industry.

In addition to the POWR Ratings we’ve stated above, we also have DIS ratings for Momentum, Quality, Value, and Stability. Get all DIS ratings here.

What To Do Next?

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AAPL shares were trading at $222.39 per share on Monday afternoon, down $4.41 (-1.94%). Year-to-date, AAPL has gained 15.95%, versus a 20.51% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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