Industry giant, The Walt Disney Company’s (DIS) third-quarter earnings report showed an 89.8% year-over-year decline in net income to negative $153 million. Moreover, the writers’ strike continues to impact entertainment giant DIS.
On May 17, 2023, DIS’s CFO Christine McCarthy said at Moffett Nathanson’s Inaugural Technology, Media, and Telecom conference that the entertainment giant’s content spending will hit around $30 billion this year. However, she warned the strike could impact spending for the remainder of the fiscal year.
The stock has slumped 18.3% over the past six months and 30% over the past year to close its last trading session at $85.92, lower than its 50-day and 200-day moving averages of $88.68 and $95.29, respectively.
However, quality entertainment stocks News Corporation (NWSA) and Vivendi SE (VIVHY) look better positioned to capitalize on the industry’s growth prospects. So, these stocks could be wise additions to your watchlists.
Regarding the entertainment industry, the TV and radio broadcasting industry is increasingly adopting advanced technologies like virtual reality to potentially impact audiences. Live events such as sports and music are expected to boost the demand for VR adoption by helping audiences to connect with major events through a dynamic environment.
The media market is expected to grow at a CAGR of 7.8% until 2027.
Also, smartphone penetration, low data tariff, and investments in original and regional digital content are favorable factors for digital access and content supply, and are driving online consumption across the media & entertainment industry.
The Media & Entertainment Market is expected to grow to $40.36 billion by 2028, at a CAGR of 7.8%.
Let us take a look at the featured stocks:
News Corporation (NWSA)
NWSA is a media and information services company that creates and distributes authoritative and engaging content, and other products and services for consumers and businesses worldwide. It operates in six segments, Digital Real Estate Services; Subscription Video Services; Dow Jones; Book Publishing; News Media; and Other.
NWSA’s trailing-12-month asset turnover ratio of 0.58x is 19.9% higher than the industry average of 0.48x. Its trailing-12-month CAPEX/Sales of 5.05% is 25.7% higher than the industry average of 4.02%.
On August 10, 2023, NWSA declared a quarterly dividend of $0.10, payable on October 11, 2023. NWSA pays an annual dividend of $0.20, which translates to a dividend yield of 0.95%. Its four-year average yield is 1.19%.
In the fiscal fourth quarter (ended June 30, 2023), NWSA’s total revenues came in at $2.43 billion. Its total segment EBITDA increased 8% year-over-year to $341 million. During the same quarter, the company’s adjusted net income attributable to shareholders amounted to $78 million, while its adjusted EPS came in at $0.14.
Street expects NWSA’s revenue in the fiscal first quarter (ending September 2023) to be $2.47 billion. Its EPS for the same quarter is expected to be $0.09.
NWSA’s shares have gained 14.2% year-to-date to close the last trading session at $20.78.
NWSA’s POWR Ratings reflect this positive outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Growth and Sentiment. Among the 11 stocks in the Entertainment - Media Producers industry, it is ranked first.
To see additional POWR Ratings for Momentum, Quality, Stability, and Value, click here.
Vivendi SE (VIVHY)
Headquartered in Paris, France, VIVHY operates as an entertainment, media, and communication company in France, the rest of Europe, the Americas, Asia/Oceania, and Africa. It operates through Canal+ Group; Havas; Prisma Media; Gameloft; Vivendi Village; New Initiatives; Generosity and Solidarity; and corporate segments.
On July 27, 2023, VIVHY announced that Prisma Media entered into a put option agreement on July 26, 2023, with Groupe Figaro for the full sale of the Gala magazine.
This agreement is subject to the information and consultation procedures involving the relevant employee representative bodies. Groupe Figaro also needs to be approved as a suitable purchaser by the European Commission.
VIVHY’s trailing-12-month CAPEX/Sales of 4.09% is 1.7% higher than the industry average of 4.02%. Its trailing-12-month cash per share of 1.76x is 17.7% higher than the industry average of 1.49x.
VIVHY pays an annual dividend of $0.28, which translates to a dividend yield of 3.18%. Its four-year average yield is 47.91%.
During the six months ended June 30, 2023, VIVHY’s revenues increased 3.7% year-over-year to €4.70 million ($5.11 million). Its adjusted net income increased 458.6% year-over-year to €324 million ($352.35 million), while its adjusted net income per share increased 433.3% year-over-year to €0.32.
Analysts expect VIVHY’s revenue to increase 5.3% year-over-year in the fiscal year ending December 2023 to $10.66 billion. Its EPS for the same year is expected to rise 51.1% year-over-year to $0.77. Moreover, it has surpassed the revenue estimates in three of the trailing four quarters, which is impressive.
The stock gained marginally intra-day to close the last trading session at $8.69.
VIVHY has a B grade for Sentiment. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated VIVHY’s Stability, Value, Growth, Momentum, and Quality. Get all VIVHY ratings here.
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NWSA shares were trading at $20.66 per share on Friday morning, down $0.12 (-0.58%). Year-to-date, NWSA has gained 14.25%, versus a 14.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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