This Stock Is the Real Winner of Apple's Streaming TV Push

Apple TV+ will be an immediate competitor in the streaming TV business, but investors won't need to pick the winner of the streaming wars to profit. One cord-cutting company is going to be raking in cash as the streaming competition heats up.

Of course, all streaming TV services have contributed to our worldwide shift from cable to wireless; fierce competition between Hulu, Walt Disney Co. (NYSE: DIS), Netflix Inc. (NASDAQ: NFLX), and Inc.'s (NASDAQ: AMZN) Prime Video has elevated quality in a market where "content is king."

And Apple Inc. (NASDAQ: AAPL) certainly has the cash to become an immediate leader in the content space.

It demonstrated this at its March keynote address, bringing Steven Spielberg, Oprah Winfrey, and a host of other celebrities on stage to unveil its new Apple TV+ app. Each guest spoke to their upcoming contributions to Apple's catalog of original content.

Apple TV+ promises only original content, for now - no third-party movies or shows - but it will offer the ability to integrate your HBO, Starz, and other subscription streaming services.

The lack of a back catalog makes its competition with Amazon and Netflix tougher, but the potential for Apple to add third-party content in the future will even the playing field.

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And make no mistake, there is a reason some of the biggest tech companies on the planet are fighting for streaming supremacy. Consumers are quickly turning toward streaming options either to supplement or replace traditional cable and satellite hookups.

Netflix already has a global subscriber list of 139 million people, while Amazon is gaining ground with over 100 million subscribers to its video service. Apple is clearly looking to harness the streaming movement to add even more profit to its bottom line.

Plus, a study from PricewaterhouseCoopers showed only two-thirds of American households still subscribe to cable or satellite today. And that figure continues to shrink.

Last summer, analyst firm eMarketer found the number of consumers leaving their cable and satellite companies for cord-cutting options had grown by 32.8% to over 30 million.

The age of streaming options is in full swing, as more content and smart devices - not to mention the higher speeds of 5G networks - are added to the mix.

But we don't need to pick the winner of the streaming wars to profit. This sort of competition between tech giants is going to be a huge catalyst for one other tech stock.

You see, more quality will be a huge boost for cord cutters who can replace their cable subscriptions with even more content. And as people move away from their cable boxes and toward streaming services, this company stands to benefit the most. That's why it's going to get a big jolt from Apple's success.

In fact, Money Morning Executive Editor Bill Patalon, a 22-year investment veteran, calls this "one of the best next-generation growth stocks on the market."

Here's why...

The Big Winner of the Cord-Cutting Movement

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The big winner is going to be Roku Inc. (NASDAQ: ROKU). This over-the-top (OTT) media provider doesn't own television shows or films, but it gives the user the ability to stream video from any of the main streaming services and even from other places on the web.

Bill told his subscribers about Roku last February in his "Private Briefing," and they've had the chance to book 40% gains since then. But the best is yet to come for this stock, which is why we had to let Money Morning readers know about it right now.

Apple will throw gas on the fire of streaming's popularity, and Roku is the big winner as more and more users migrate to streaming services.

Roku is already excited about Apple's entrance into the streaming market. After the announcement, Roku CEO Anthony Wood said "The more services people can buy on our platform, the more money we can make."

These words were backed by a 4.7% uptick in the Roku stock price the moment Apple TV+ was announced. Apple included Roku on its list of compatible devices.

Roku had already commanded 37% of the OTT market for TV streaming platforms. Its inclusion on Apple TV+'s list of compatible devices could expand its market share even further.

So Apple's move to streaming subscriptions is a subtle indication that it's taken one foot out of the streaming device market. And it's had good reason to do so, commanding only 15% compared to Google's 18% and Amazon's 24%.

That's right, Roku stands as the market leader, with 37% of the pie. And this number will only grow as more content is made available on the Roku platform.

Roku is unique in that it provides ad-supported access to content through its devices, which allows a quality TV experience at a much lower cost than its competitors do. Apple TVs cost $149 at minimum, while the Roku player starts at around $29.99. This has worked in its favor over the last few years.

While the Apple TV will still compete with Roku, the Roku player is a third of the price and doesn't require its users to integrate into the Apple ecosystem. That will always give it a foothold in the streaming market.

Plus, Roku is a young and growing tech company. That means you've got a chance to get in early before it really takes off.

Roku has grown its revenue for four straight years. And in 2017, it launched a platform for advertisers to begin displaying promotional ads to users. The following year, Roku's gross profits went up 66%, from $199,833 to $332,148.

With a 58% increase in research and development spending over 2017 to 2018, the company still operates at a loss - but just barely. Though sales growth is currently negative, it's expected to hit positive 6.9% next year, with 12% earnings growth. These numbers may start small, but they will continue to climb by even greater percentages as long as Roku controls the OTT market.

According to its Q4 2018 earnings conference call, Roku net revenue grew by 45% in 2018. Revenue from purchases of its platform increased 85%, indicating a huge cord-cutting trend and demand for more Roku devices. The company also cited streaming hours increased by 9.2 billion and that one in four smart TVs sold in the United States featured built-in Roku devices.

Today, the company is worth $7 billion. A share of Roku stock sells for $62.18, but some analysts project it could hit $85 in the next 12 months. Another says it could reach $97 by 2020, a 50% gain.

Apple TV+ will continue to be a victory for the company, provided Apple's content lives up to the hype. Consumers have every incentive to gravitate to the Roku device for their streaming experience, as they did all last year.

Plus, Roku is also not likely to face much competing market penetration. Analyst Laura Martin of Needham Co. says the time to market for this kind of device is so long that it wouldn't be profitable for a company to create one from scratch. Roku, like the Apple TV, took a decade to develop.

Because of the device's versatility, a growing volume of advertisers, and its variation in products, Roku has reached a wide audience and grown 43% year over year for August 2018.

The stock is a must-buy this year, before the streaming wars really heat up.

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About the Author

Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.

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