between cable companies and telecoms to effectively deliver video services,” says John Slack, an equity analyst at Morningstar. “Network equipment providers are the arms dealers, and when there’s a war, they are the ones that make the money.”
Other suppliers to the video downloading trend stand to gain. Green of Piedmont Advisors likes Corning Inc. (GLW), the former glassmaker that has transitioned into a technology company. Corning makes fiber optic lines for broadband networks and is also a leader in liquid-crystal displays for computer monitors and flat panel televisions. Its stock traded fairly cheaply in late July, with a forward price-to-earnings ratio of about 17. That makes it relatively inexpensive, given an analyst consensus forecast of 18% earnings growth this year, and an estimated average of 17% over the next five years. “They have solid earnings growth at a reasonable price,” says Green. “That’s hard to come by in today’s environment.”
Meanwhile, companies that deliver DVDs and are starting to offer movie downloads aren’t generating as much interest. For example, investors such as Rottinghaus have tended to shy away from stocks like Netflix (NFLX) and Blockbuster (BBI). These companies now offer a limited selection of movies online, but online delivery is outside of their traditional business model. Their forays into video downloading have been expensive, Rottinghaus says, but the companies have not yielded much in terms of new revenues as they compete against each other by lowering monthly rental fees.
Still, investing options abound. “Video has been on the In
ternet for a while, but it is really proliferating now,” says Stimpson. “It might not be the sole reason to own any in the group of infrastructure players, but it’s another opportunity for investors.”