Buy alert: 3 consumer goods stocks are betting big on streaming advertising

A recent article in Advertising Week Highlighting the success of both Disney (NYSE:DIS) And Netflix (NASDAQ:NFLX) have with their ad-supported streaming products. That got me thinking about the consumer stocks that have supported the two companies and the revenue growth from increased advertising.

“Overall, given the younger life stage of Netflix and Disney+, we’re going to see a more significant increase in ad-supported activity,” Nicole McCurnin, director of advertising insights at Guideline, told Adweek. “But it’s picking up more. We’re seeing that having an impact.”

In the first quarter of 2024, Disney+ led the way in gross media spending growth with a 210% increase, followed by Netflix with a 135% increase.

My theory is that the consumer stocks that advertise on these two ad-supported networks are the names investors should consider for their portfolios, because anyone who spends a lot of money on ad-supported streaming platforms that have been around for 18 months knows that their business is probably doing well.

Here are my three choices.

Top consumer goods stocks: Marriott International (MAR)

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When the ad-supported version of Disney+ launched in December 2022, Marriott International (NASDAQ:TO DAMAGE) was one of around 100 brands that advertised on the streaming platform.

At the time, Disney’s streaming business was losing $1.5 billion per quarter. In the quarter ended March 31, the streaming business, which is part of Disney’s entertainment segment, posted a loss of $47 million, a significant increase from $587 million a year earlier.

It’s interesting to see a major advertiser on Disney+ competing with The House That Walt Built for travelers’ dollars. There’s enough for everyone.

On June 3, Marriott announced that three U.S. luxury properties will become brands within its Marriott Bonvoy portfolio this summer: The Resort at Pelican Hill, Turtle Bay Resort and a luxury hotel in Midtown near Central Park in New York City.

“Strengthening and expanding our luxury offering is a top priority for the company and I am proud that Marriott continues to be the clear industry leader in this segment,” said Dana Jacobsohn, Chief Development Officer, US Luxury Brands & Global Mixed-Use.

The company’s luxury properties – 510 in 70 countries – account for 10% of Marriott’s open rooms and future pipeline. As of March 31, Marriott had 8,861 hotels and 1.64 million rooms worldwide.

Analysts are rather cautious about MAR shares. Only six of them rate it as a buy, with a price target of USD 248, 3% more than last year. In 2024, the company plans to distribute USD 4.3 billion to shareholders in dividends and share buybacks.

Starbucks (SBUX)

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Starbucks (NASDAQ:SBUX) was one of the other top brands to sign on to advertise on Disney’s ad-supported tier. For years, Starbucks never advertised, but now it’s relatively commonplace. It’s definitely the right advertiser for Disney+.

Starbucks is in the midst of a crisis. In the second quarter, sales at its US stores fell 3% as the number of customers fell 7%, while the average checkout value rose 4%. As a result, the North American business generated $6.38 billion, flat from a year ago, while operating profit fell 6% to $1.15 billion.

A total of 364 new stores were opened in the second quarter, ending the year with a total of 38,951, of which 52% were owned and 48% were licensed.

Although the quarter did not meet expectations, the company is working on a plan to be implemented in all North American stores by the end of July, with a focus on improving processes to speed up operations while making life easier for baristas.

Anyone who has ever been to Starbucks knows that they have a unique way of doing things that sometimes comes at the expense of the overall look of the store. Time will tell if the changes will have the desired effect.

What I do know is that Starbucks handles challenges better than most. That always makes the stock attractive.

LVMH (LVMH)

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LVMH (OTCQB:LVMUY) Brands like Louis Vuitton and Tiffany & Co. advertised on Netflix’s ad tier when it launched in November 2022. While Tiffany makes sense for the audience you’d expect from an ad-based version, Louis Vuitton’s presence suggests the company wants to reach as many American consumers as possible.

Bernard Arnault is one of the smartest minds in business. His story of how he turned the company from a bankrupt brand group into the largest and best luxury conglomerate in the world is an interesting one. It is not for nothing that he is the third richest person in the world.

In the last quarter, the company generated revenue of 20.69 billion euros (22.23 billion US dollars), an organic increase of 3% year-on-year. In 2023, the operating margin was 26.5%, a very good figure. These margins are to be maintained. The company generated 25% of its revenue of 86.2 billion euros (92.63 billion US dollars).

When LVMH acquired Tiffany in early 2021, it set out to move the brand up the luxury food chain. As a result, the brand’s profits doubled. The company is not afraid to reinvest those profits in its business, spending $500 million to renovate Tiffany’s New York flagship store.

Demand for luxury goods will always experience ups and downs, but there’s no denying that the number of people who can afford a $2,500 handbag has skyrocketed over the past decade.

At the time of publication, the editor in charge did not own (either directly or indirectly) any positions in the securities mentioned in this article.

On the day of release, Will Ashworth had (neither directly nor indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publishing guidelines.