Entertainment Stock Picks For 2023: What Wall Street Is Bullish About Despite Downbeat Sentiment


Entertainment Stock Picks For 2023: What Wall Street Is Bullish About Despite Downbeat Sentiment

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Entertainment Stock Picks For 2023: What Wall Street Is Bullish About Despite Downbeat Sentiment
Entertainment Stock Picks For 2023: What Wall Street Is Bullish About Despite Downbeat Sentiment

Many entertainment CEOs and investors may want 2022 to quickly forget how devastating it was to various media stocks.

However, 2023 is unlikely to bring any respite any time soon. Finally, fears of a recession and its impact on advertising revenue, accelerating cable cuts and recent profit concerns surrounding the streaming businesses of Hollywood companies cast a dark cloud over the industry.

With that in mind, The Hollywood Reporter rated several media and entertainment analysts for the coming year.

Michael Nathanson , Moffett Nathanson
Alternatives: Walt Disney, Fox
Seasoned entertainment industry analysts "outperform" both companies in their ratings. Nathanson updated Disney on "market performance" in late November and raised the price target from $20 to $120, citing the return of Bob Iger as CEO. "The magic is back," he summed up his appeal in the title of his report. “We applaud the Disney board for having the courage to make this change,” the expert said. “We never hide our affection for Mr. Iger and the work he has done to make Disney the global power it is today. We do not recommend sharing as of May 2020. CEO Bob Chapek is committed to a streaming strategy that takes current reality into account. I can not understand.

As for Fox, where Nathanson has a $46 price target, he is skeptical of a possible meeting with News Corp. But he noted in a November report: "As an independent company, Fox Corp. Strong first-quarter and first-quarter residual results fiscal year 2023 with the next round of affiliate fee increases, Super Bowl, political ads, Tubi, World Cup and the biggest contributors to the Bottom Line: Thursday Night Football loss.

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John Blackledge , Cowen
Choose: Netflix
On Dec. 9, the analyst raised long-term forecasts for the streaming giant's subscribers, revenue and operating income, raising his price target to $405 from $340 as a result. Overall, he named Netflix, which he called "underperforming," as his "top pick" on Cowen's "Best Ideas of 2023" list. Blackledge explains: “The key drivers for Netflix in 2023 were (i) new monetization levers, including a new layer of low-cost advertising (which could drive faster net subscriber adds) and the launch of a global payment sharing solution. in 2023; (ii) an accelerated return to revenue in the second half of 2023; and (iii) higher growth in free cash flow. »

Michael Pachter , Wedbush Securities
Choose: Imax
Screen giant Imax is rated Top with a $20 price target on stock on Pachter Wedbush's November Best Ideas list. “We see IMAX as 1) the best way to play out the theatrical renaissance, 2) the best position to capitalize on the ongoing consumer shift toward high-end theatrical equipment, 3) a strong way to position ourselves for China's emerging position. economy," he explains. And in the long run, experts also see it as "the best place to enjoy alternative cinema content." Citing the expected return on the payment boost, Pachter predicted: "Once Imax can demonstrate consistent profitability, Imax will once again earn multiples of premium."

Doug Kreutz, Cowen
Choose: Take-Two Interactive Software
Entertainment industry analysts singled out video game stocks in a Dec. 12 report titled "Best Ideas for 2023: Back to Old Favorites," reiterating an "outperform" rating and a $147 price target. . "Take-Two is the leading operator in the global video game market with the best long-term track record of any peer group," he said. "Recently lackluster management guidance and general investor dissatisfaction with video games makes for an interesting entry point." Kreutz highlighted its "development talent, intellectual property, and strong leadership" and called Take-Two a "quality vehicle to invest in what we hope will be the next decade of video game GDP." Bearish on Zynga and mobile game acquisitions in general." Dan Kreutz expects more clarity on Grand Theft Auto 6 's release date in the new year, which could act as a catalyst for stocks: "We expect GTA 6 in the calendar year 2024".

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Benjamin Swinburne , Morgan Stanley
Selection: Endeavour, Warner Music Group, Liberty Media – Formula One Group
"Direct-to-consumer streaming is entering a new phase: streamlining and consolidation," Swinburne said in his December 19, 2023 Outlook. "In the long term, this will drive revenue. By 2023, we're more than supply side: We own content across sports, entertainment, and music. Specifically, that means Endeavor classifies as "overweight," with its top picks Warner Music Group and Liberty Media Formula One Group. "They all offer healthy perks, frequent deals and free cash flow growth. Always be on the supply side in a global media industry with ever-changing distribution." Swinburne noted that Endeavor (at his $30 price target with 50% return) "monetizes general sports and entertainment content." , while Formula 1 (with a return of 30% on its $75 price target) “captures the growing global popularity of Formula 1.” Meanwhile, Warner Music (20% on Swinburne's Return price target of $41) is "one of only three record labels that collectively account for approximately 80% of global music consumption. The Morgan Stanley analyst added: "Endeavor and Formula 1 also benefited from a sharp drop in earnings, which limited the risk of a downgrade due to a sluggish economy.

Steven Kahl , Wells Fargo
Alternatives: Lionsgate and others
Why : "Media issues are skewed negatively (advertising pressures, cable cuts, transmission slowdowns)," analysts noted in a Dec. 20 report, saying the broader industry "will continue to be at a disadvantage at least until that the cyclical pressures calm down". As a result, in media we like Disney and Netflix (content reach + streaming and each with a self-contained story), Fox (cash flow, sports betting, modest valuations), Lionsgate (deal) and IMAX (slate technology +)” , Cahl calls Lionsgate. The stock is "overweight" with a $12 price target. "Lionsgate had reason to quit after the round, but seems a long way off," he wrote in a recent note. "We believe Lionsgate will continue to work for change." and separation of the studios from Starz in mid-2023. While we are not optimistic about Starz's valuation, we believe the studio is worth much more than the company today. Ultimately, "it's a content gold rush and Lionsgate could be a provider of spikes through its studio business."

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Summary of the top 10 stock picks

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