When an industry is new, it may result in dozens or even hundreds of companies creating a product or service. As it matures, an industry will tend to consolidate into just a handful of players.
The classic example of this is the automotive industry, where a number of brands either went bankrupt, or were absorbed into what are now known as the “big three.” Other industries are consolidating now.
Finding the best values out there can mean getting into companies poised to get bought out as the number of total players shrinks. One area that’s seen a big increase in competitors in the past few years has been the streaming space. A number of companies have even launched multiple streaming services.
Paramount Global (PARA) is now looking into combining its Paramount+ service with Showtime. Such a move would cut costs, and make the service more competitive relative to peers.
The streaming service is already cheaper than peers, trading at 13 times forward earnings. Plus, revenue is up 19 percent in the past year, when a number of bigger streaming companies have struggled with subscriber growth.
Action to take: Shares look inexpensive here, and are likely worth picking up over the past few months, with an eye towards buying more during any market volatility. Shares also yield about 4 percent right now, and higher revenues can lead to a higher dividend payout in time.
For traders, the March 2023 $25 calls, last going for about $1.75, could deliver mid-double-digit returns in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.