Many CEOs and investors in the entertainment industry may want to quickly forget about 2022, given how devastating it has been to various media stocks.
However, it seems unlikely that 2023 will bring many amnesty in the short term. After all, recession fears and their impact on ad revenue, the recent surge in cable cutting rates, and profit concerns have taken a toll on companies’ streaming businesses. Hollywood companies are among the dark clouds covering the industry.
With that in mind, hollywood reporter is looking at several media and entertainment analysts’ picks for the coming year.
Make a choice: Walt Disney, Fox
Why: The veteran entertainment industry analyst gave the two companies an “outperform” rating. Nathanson upgraded Disney from “market performance” in late November and increased his stock price target by $20 to $120, citing Bob Iger’s return as CEO. “Magic is back,” he summed up his appeal in the title of his report. “We applaud Disney’s board for bravely making this change,” the expert explained. “We have never hidden our love for Mr. Iger and the work he has done in building Disney into the global powerhouse it is today. We haven’t recommended the stock since May 2020 for a variety of reasons, including concerns that former CEO Bob Chapek has become attached to a streaming strategy that doesn’t make sense with today’s realities. “
For Fox, Nathanson has a stock price target of $46, and is skeptical of a possible reunion with News Corp. But he emphasized in a November report: “As an independent company, Fox Corp. starting with better financial results in the first quarter and the rest of fiscal 2023 fueled by the next affiliate fee hike, Super Bowl, political ads, Tubi, World Cup and positive points biggest to the bottom line – Thursday Night Football loss disappears.”
Why: The analyst raised his forecast for long-term subscribers, revenue and operating income for the streaming giant on December 9, and as a result raised his stock price target from 340 dollars to $405. All in all, he calls Netflix, which he rates as “outperform,” as his “top big-cap pick” on Cowen’s list of “Best Ideas for 2023.” Blackledge explains: “The main drivers for Netflix’s market share in ’23 were (i) new monetization levers, including a new lower-priced ad tier (which could drive an acceleration in membership numbers). net members) and a paid sharing solution launched globally in ’23; (ii) revenue picks up again in the second half of 2023; and (iii) growth in free cash flow.”
Michael PachterWedbush . Securities
Why: Pachter added giant-screen exhibitor Imax, whose stock is rated “outperform” with a $20 price target, to Wedbush’s “best ideas list” in November. I view Imax as 1) the best way to drive the upcoming theater recovery, 2) the best location to benefit from the continued consumer shift to premium theater amenities, 3 ) a solid way to position the Chinese economy’s recovery,” he explained. And in the long run, the expert also found this to be “the best position to gain from alternative theatrical content.” Referring to the expected return of box office momentum, Pachter predicts: “Once Imax can demonstrate steady profitability, it will once again dominate the premium box office.”
Pick: Take-Two . interactive software
Why: The entertainment industry analyst highlighted the video game stock in its December 12 report titled “Best Ideas for 2023: Returning to Old Favorites,” reiterating its “outperform” rating. ” and a stock price target of $147. “Take-Two is the top operator in the global video game market with the best long-term track record in the peer group,” he argues. “Management’s recent guidance has been lowered and the general investor uncertainty towards video games makes for an attractive entry point.” Welcoming the company’s “developmental talent, intellectual property, and strong management capabilities,” Creutz also calls Take-Two a “high-quality vehicle for investing in what we expect to be fast-paced. growth to GDP in the video game sector over the next decade.” The expert further suggested that “the market is overly bearish on Zynga acquisitions and mobile gaming in general.” And Creutz expects even more clarity on the release date for Grand Theft Auto 6 in the new year, this could be a catalyst for stocks: “We continue to expect GTA 6 in the calendar year 2024.”
Benjamin SwinburneMorgan Stanley
Make a choice: Endeavor, Warner Music Group, Liberty Media – Formula One Group
Why: “Direct-to-consumer streaming is entering a new phase: streamlining and consolidation,” Swinburne noted in its December 19 outlook for 2023. “In the long term, this should improve. profit. For ’23, we prioritized the syndicator – the owners of sports, entertainment and music content.” Specifically, that means Endeavor is rated “overweight,” his top pick, Warner Music Group and Liberty Media’s Formula One Group. “It all comes down to healthy, often contracted revenue and free cash flow growth,” he stressed. “In a global media industry that sees ever-expanding distribution, stick to the supply side.” Swinburne emphasized that Endeavor (50% above its $30 share price target) “monetizes both general sports and entertainment content,” while Formula 1 (30% above its target) $75 price tag) “is benefiting from Formula 1’s growing global popularity.” Meanwhile, Warner Music (20% above Swinburne’s $41 share price target) “is one of three music labels that represent about 80% of global music consumption.” The Morgan Stanley analyst added: “Endeavour and Formula 1 also benefited from strong contract revenue, limiting downside risk of a cooling economy.”
Steven CahallWells Fargo
Make a choice: Lionsgate and more
Why: “Media themes tilt to the negative (advertising pressure, cable cuts, slow streaming),” the analyst noted in a Dec. 20 report, arguing that the broader sector will “unpopular until at least the cyclical pressure eases.” As a result, in media, “we prefer Disney and Netflix (content + streaming scale and they are both self-help stories), Fox (cash flow, sports betting, valuations) modest), Lionsgate (trading) and Imax (technology + shale). Cahall rates Lionsgate stock as “overweight” with a $12 price target. “Lionsgate was supposed to be hot after the rotation, but that is far from it,” he wrote in a recent note. “We think Lionsgate continues to work towards separating Studios from Starz and shooting in mid-2023. While we’re not optimistic about Starz’s valuation, we think Studios is of comparable value, if not more. I mean better than the current company.” After all: “It’s a content gold rush, and Lionsgate could be the pick-and-pocket provider through its Studio business.”