U.S. Markets closed

Why Strong Subscriber Growth for Hulu, Netflix Bodes Well For The Sector

Dave Royse

Strong subscriber and ad revenue growth announced this week by Hulu and Roku Inc. (NASDAQ: ROKU) reinforces the notion that streaming, digital media is on a strong growth path, Raymond James analysts said in a note.

Hulu

Hulu announced it added 8 million live TV and on-demand subscribers last year, its largest annual increase. The growth put Hulu over the 25 million subscriber mark for the first time. The company also reported just under $1.5 billion in ad revenue, up more than 45 percent over 2017.

Hulu is a joint venture with Walt Disney Co. (NYSE: DIS),Twenty-First Century Fox Inc (NASDAQ: FOXA) and Comcast Corporation (NASDAQ: CMCSA) each holding a 30-percent stake. AT&T Inc. (NYSE: T) unit WarnerMedia holds the other 10 percent.

Roku

Hulu’s announcement followed positive news from Roku, which reported fourth-quarter active accounts went over 27 million, up about 40 percent year-over-year, and that its estimate of streaming hours were up nearly 70 percent over the same quarter a year earlier.

What It Means

Raymond James analyst Justin Patterson wrote in an industry brief the news reinforces the idea viewership is continuing to surge toward digital streaming channels. The company reports also show viewer engagement is increasing with the digital providers and that could be good news for advertisers looking for a young, engaged audience.

Patterson noted the median age of Hulu viewers is 32, far lower than the 56-year-old median age of broadcast TV viewers, and that the average time each subscriber spent watching Hulu was up 20 percent in 2018.

“We believe the combination of a young demographic and strong engagement trends is driving advertiser demand,” Patterson wrote in the note.

Patterson also said that while industry leader Netflix, Inc. (NASDAQ: NFLX) continues to see solid trends, the strong results from Hulu and Roku show there’s room for several players in the burgeoning sector, which also includes Amazon.com, Inc. (NASDAQ: AMZN) and AT&T-owned HBO.

“Overall, positive trends across companies reinforce our view that there will be multiple winners in the space,” Patterson wrote. “Given solid engagement trends at Roku and Hulu, we expect to see continued advertiser interest in digital video in 2019.”

Related Links:

Goldman Sachs Adds Netflix To 'Conviction Buy' List

What's New At Hulu? Offline Viewing, New Shows And More

Latest Ratings for ROKU

Date Firm Action From To
Dec 2018 KeyBanc Maintains Overweight Overweight
Dec 2018 SunTrust Robinson Humphrey Initiates Coverage On Hold
Dec 2018 DA Davidson Upgrades Neutral Buy

View More Analyst Ratings for ROKU
View the Latest Analyst Ratings

See more from Benzinga

© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.