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Lights, Camera, Stocks: Your Guide to Investing in the Media and Entertainment Industry
Rapid change and major innovation can create major opportunity within the Media and Entertainment space. Read on to discover our stock tips, industry analysis and more investing intel.
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Good day, and welcome to another edition of Investing Intel from the team at ValueTheMarkets! As always, the newsletter is packed with investing tidbits we think you’ll enjoy, including:
👉 Three stock insights
👉 Investing signals
👉 Fear & Greed Index
👉 Key dates for your diary
👉 Some fun facts!
This week, we’re looking at media and entertainment stocks, an exciting space that has undergone seismic change over recent years.
It’s a sector that covers companies involved in the production, distribution and consumption of entertainment content, including movies, TV shows, music and video games.
The rise of streaming services and changing consumer preferences have led to huge changes in the media and entertainment industry, creating both opportunities and challenges for investors.
In this newsletter, we'll provide you with insights and analysis on the latest trends and developments in the industry, as well as highlight some of the top-performing stocks and potential investment opportunities to watch.
So, which media and entertainment stocks do we think are worth your time?
The Transformer - Meta Platforms (NASDAQ: META)
We’re kicking things off with a little company you might have heard of. That’s right, we like the look of Mark Zuckerberg’s Meta Platforms (NASDAQ: META), the huge social media and technology giant behind Facebook, Instagram, WhatsApp and all things metaverse.
But Meta Platforms has been through the wringer recently, so why do we like it so much right now?
Well, the company’s foundations are enviable. It holds a dominant position in the social media space, with billions of monthly active users. The business can leverage this vast user base to generate advertising revenue and introduce new products or services.
That’s positive, because the company’s advertising business remains strong, driven by the shift of advertising spending from traditional media to digital platforms.
What’s more, the company has invested huge sums in the next generation of technology. This means virtual reality (VR), augmented reality (AR), artificial intelligence (AI) and the metaverse.
While the weight with which Meta Platforms has thrown itself into these technologies has raised eyebrows, these investments could help the company reduce its reliance on advertising revenue and unlock additional growth opportunities.
To cap this off, the business has consistently delivered strong financial results, with significant revenue growth and profitability. The company had a rough time in 2022 and has since made some major layoffs, in line with other tech giants.
However, its strong record, commanding position and forward-thinking strategy could poise the business for great heights.
Social media dominance
Transformation and diversification
Solid historical financial record
The Networker - Charter Communications Inc (NASDAQ: CHTR)
Coming in next is broadband services provider Charter Communications Inc (NASDAQ: CHTR), widely known through its Spectrum brand.
This is a business well-placed to exploit significant growth in demand for high-speed internet as consumers become more and more reliant on home internet for work and entertainment. This demand is rising because of the increasing prevalence of home-based or flexible employment and the increasing use of streaming services and web-based content.
Charter is being proactive in reaction to this demand. The business is continuously expanding its services, such as mobile, video, and voice services, providing multiple revenue streams and allowing the company to cross-sell products to its existing customer base.
What’s more, the business has been investing heavily in upgrading its network infrastructure to provide faster and more reliable internet services, improving its ability to acquire and retain customers.
Diversification comes in the form of an advertising sales division, which offers businesses the opportunity to advertise in individual and multiple service areas on cable television networks and advanced advertising platforms.
The numbers behind the company look promising too, with Charter enjoying significant revenue growth, increased subscriber numbers, and improved profitability in recent earnings updates.
Upgrading and expanding
Cash on the rise
The Publisher - E.W. Scripps Co (NASDAQ: SSP)
TV and newspaper publishing specialist E.W. Scripps Co (NASDAQ: SSP) is the last stop on our tour of promising media and entertainment stocks. This Cincinnati-based operation has operations that encompass local TV stations and national TV networks.
The company has been active in pursuing strategic acquisitions and partnerships, such as the acquisition of ION Media and Katz networks.
Additionally, E.W. Scripps has a foothold in digital media through its ownership of podcasting platform Triton, as well as digital news platforms like Newsy. This diversification may allow the company to tap into the growth of digital media and lessen its reliance on more traditional outlets.
Furthermore, the past year has seen the company lose around 50% of its share price value amid market fears of advertising spending deceleration in a recession environment. This heavy hit based on a potentially cyclical issue means investors may have an opportunity to back this stock at a cut price.
But what about this challenging environment? Does the company have what it takes to thrive?
Well, E.W. Scripps has already demonstrated resilience in navigating challenging market conditions and has maintained a stable financial position. 2022 saw the business report operating revenue growth of more than 7%, while net income jumped from $122.7m to $195.9m.
The business is looking to squeeze further profit out of its operations too, with a current focus on reorganization efforts which it says is expected to realize savings of at least $40m.
Revenue and income growth
Focus on efficiency
We’ve looked at Media and Entertainment stocks we like, but what’s in store for the sector at large? According to analysis from Deloitte, adaptation to change is the name of the game as audiences become more consumed by social media-related content. Indeed, it highlights catering for Gen Z as a key area for innovation as the group matures and gains purchasing power. Their report states:
“Recognizing the diversity of this generation, their increasing spending power, their passion for advancing social issues, and their evolving, digitally focused entertainment preferences could likely be crucial to companies looking to win favor with this young cohort.”
This would appear to be good news for Media and Entertainment companies using increasingly innovative methods to appeal to the social media mad generation.
Take, for example, QYOU Media (TSX: QYOU) (OTCMKTS: QYOUF). This business is an India-focused entertainment outfit that combines social media stars with a wide-reaching network of television channels.
If you’re looking for investing ideas in the media and entertainment industry, stay tuned for our upcoming podcast with QYou Co-founder and CEO, Curt Marvis. Curt gives a not-to-be-missed take on investing in the industry.
Make sure you are subscribed to this Newsletter and we will let you know when the Podcast is available…
Further industry analysis from the entertainment team at Allianz Global Corporate & Specialty echoes the need for innovation to succeed in the industry. Additionally, the team points to inflation as a major concern for the industry, with higher costs leading to greater consolidation as smaller struggling companies are bought up by major players.
Michael Furtschegger, Global Head of Entertainment at Allianz Global Corporate & Specialty, commented:
“We’re not out of the woods yet. In the three years since the coronavirus first hit headlines, the world has changed. The sector must continue to evolve in line with new technologies, proliferating platforms, and seismic shifts in patterns of consumption, as well as changes in the public mood, particularly among the younger generation.”
Now, let’s look at some recent investing intelligence from the broader market. The top searched stocks from the last week on Google are:
Anheuser Busch (NYSE: BUD)
WW International Inc (NASDAQ: WW)
ContextLogic (NASDAQ: WISH)
TG Therapeutics (NASDAQ: TGTX)
Beverage giant Anheuser has graced the headlines following its decision to ally itself with TikTok star and transgender activist Dylan Mulvaney. The move has incensed right-wing news outlets and talking heads alike, while some consumers have turned away from the brand, resulting in a small but significant dip in share price. However, some analysts appear convinced the move will play well with Gen Z and other more progressive consumers.
Meanwhile, WW International has piqued interest following its acquisition of Sequence, a peddler of anti-obesity drugs. E-commerce platform provider ContextLogic saw its share price dive this week after the company announced a reverse stock split. Finally, TG Therapeutics enjoyed a boost after prominent analyst B Riley said it expected a strong sales performance from the business’s newly approved multiple sclerosis treatment.
Fear & Greed
The Fear and Greed Index is a measure of stock market sentiment calculated by CNN Business using seven measures including market momentum, market volatility, and safe haven demand. It’s meant to shed light on the emotions currently driving the market, giving you insight into how traders are making decisions. Remember, traders are humans, not robots.
Since last week, the index has swung markedly towards greed. This indicates that positive investor sentiment is was pushing share prices higher as the week came to a close.
Dates in the Diary
Monday 17th – Empire State Index Manufacturing Data (Apr)
Tuesday 18th – Canadian Inflation Data (Mar) / US New Housing Starts (Mar)
Wednesday 19th – UK Inflation Data (Mar) / Eurozone Inflation Data (Mar)
Thursday 20th – US Existing Home Sales (Mar)
Friday 21st – US Manufacturing and Services Preliminary PMI Data (Apr)
More Hot Content from ValueTheMarkets
The Ultimate Guide to Investing in Media & Entertainment Stocks - Explore the dynamic world of Media & Entertainment stock investments with our comprehensive guide, uncovering the industry depths, and potential stock picks.
Analyst Brief: Investing in Media and Entertainment Stocks - Our Market Analysts have created a 360-degree analysis of the industry to help you decide if this is the right investment opportunity for you or not.
Fun Fact – The Greatest Day
If we asked you when the stock market’s greatest single-day performance came, you might be inclined to think of the tech boom of the 1990s or post-war prosperity.
One thing which probably wouldn’t spring to mind is the Great Depression.
As such, it might surprise you to learn that 15 March 1933, right amid this historic period of economic hardship, saw the Dow Jones Industrial Average land gains of 15.34%.
This record, which was catalyzed by Franklin D. Roosevelt’s New Deal program and Emergency Banking Act, has not been surpassed to this day.
Until Next Time
Many thanks for taking the time to enjoy Investing Intel today, we hope you’ve enjoyed our insights and are looking forward to more in the week ahead.
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