Needham's top-rated media analyst is calling for a "digital attention recession" as the economy reopens, which could threaten several of the tech and streaming stocks that boomed during the coronavirus pandemic. Monetization on platforms like Amazon , Netflix and Roku is closely correlated to consumer screen time, and going forward, the more valuable attention hours will not be equally distributed, according to Needham analyst Laura Martin. "As the global economy reopens, we forecast a cyclical bounce out of digital choices and into time spent in physical venues such as cinemas, live sports, theater, music festivals, restaurants, stores, etc.," she told clients. "Since consumer time is fixed, we forecast a digital attention recession over the next 12-18 months, as the physical world cannibalizes time spent and monetization from the digital world," Martin added. During the 2020 Covid-19 lockdowns, consumers spent 15% more time on digital activities each day. Martin said screen time increased one hour per day to seven hours and 50 minutes during the pandemic. However, as the economy reopens, Martin expects attention to consumer-facing digital platforms to decline by 15% over the next year and a half. Since Wall Street typically values each hour of attention between $1.00 and $2.00, this decrease could dent certain company earnings. Winners and losers Amazon, Netflix and Roku were dubbed the "stay at home stocks" in 2020. Amazon, which also rose on its e-commerce business, is up 60% in the last year. Netflix and Roku have risen nearly 50% and 320% in the past 12 months, respectively. Martin sees trouble ahead for these stocks as the world emerges from the coronavirus lockdowns. "We believe the biggest losers of attention hours will be console and PC video game play and viewing, followed by OTT streaming apps that are anchored to the home, such as Prime Video, YouTube, NFLX, Roku, etc.," she said, referring to "over the top" media services that are offered directly to consumers. Needham expects these categories of digital media to fall in attention hours by more than the 15% average decline in time spent. Needham has a buy rating on Amazon and an underweight rating on Netflix . Martin also has a buy rating on Roku and Google-parent Alphabet. Meanwhile, mobile-first platforms like Apple , Facebook and Snap will fare better with screening declines at 5% to 10% year over year in 2021. The firm said in the longer term, platforms that facilitate "creator economies" will be the most valuable. "It is clear to us that FB's consumers, YouTube's creators, and AAPL developers are driving upside shareholder value most quickly, at minimal incremental costs and without upside limitations," said Martin. Needham has a buy rating on Apple. The firm has a hold rating on social media giant Facebook and Snap. For Apple specifically, Needham said the Tim Cook-led tech giant's valuation, pricing power, competitive advantage and barriers to entry rely on 1 billion of the wealthiest consumers in the world using Apple devices three to five hours each day. "AAPL is focusing on products and services that drive stickiness and ecosystem lock-in," said Martin. Martin is a top-rated media analyst on Wall Street. She has a 67% success rate and an average annual return of 31%, according to TipRanks. — With reporting from CNBC's Michael Bloom.
The Roku IPO at the Nasdaq, September 28, 2017.
Needham's top-rated media analyst is calling for a "digital attention recession" as the economy reopens, which could threaten several of the tech and streaming stocks that boomed during the coronavirus pandemic.
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