ZACKS·2025-11-26 18:31Core Insights - The streaming entertainment industry is rapidly evolving, with Netflix as the global leader and Starz as a newly independent player targeting niche audiences [1][2] Group 1: Netflix (NFLX) Overview - Netflix reported a 17% year-over-year revenue growth in Q3 2025, reaching approximately $11.5 billion, marking its fastest growth rate in years [3][7] - The ad-supported tier has gained traction, with around 190 million monthly active viewers globally, and management expects ad revenues to more than double in 2025 [3][7] - Netflix's strategic move into live programming includes significant deals for WWE and NFL events, which are expected to enhance audience engagement and advertising revenue [4][19] - The company completed a 10-for-1 stock split in November 2025, aimed at making shares more accessible and signaling long-term value creation [5] - International revenues are growing, with Asia-Pacific up 21% and Europe, Middle East, and Africa up 18% year over year [5] - The Zacks Consensus Estimate for 2025 earnings is $2.53 per share, indicating a 27.78% increase from the previous year [6] Group 2: Starz (STRZ) Overview - Starz's financial loss widened to $52.6 million in Q3 2025, a 72% deterioration from the previous year, despite adding 110,000 streaming subscribers [10][11] - The company faces high leverage with a ratio of 3.4 times, which management aims to reduce, but profitability improvements remain uncertain [11][12] - Starz's revenues increased modestly to $321 million, highlighting struggles to generate significant top-line momentum [10] - The company lost 240,000 linear subscribers and 950,000 total customers year over year, reflecting challenges in the premium cable network space [12] - The Zacks Consensus Estimate for 2025 loss has widened to $4.05 per share, indicating deteriorating financial performance [13] Group 3: Valuation and Performance Comparison - Netflix trades at a forward price-to-earnings ratio of 33.35 times, reflecting its market leadership and growth potential [14] - In contrast, Starz has a negative price-to-earnings ratio of 6.1 times, indicating its current unprofitability and substantial business challenges [15] - Year-to-date, Netflix shares have surged 20%, while Starz has declined by 2.2%, underperforming the broader sector [16] Group 4: Conclusion - Netflix shows significantly better upside potential compared to Starz, driven by global scale, diverse revenue streams, and strong growth momentum [19][21] - Starz struggles with widening losses, subscriber stagnation, and high debt levels, making it less attractive for investors [21]