Media stocks did well in 2018 courtesy of strong demand for political advertising in the United States related to mid-term election, increasing investments in original content and focus on providing quality entertainment.
The solid performance, to an extent, is reflected in Invesco Dynamic Media ETF’s (PBS) year-to-date return of 7.9% against the S&P 500 composite’s decline of 1.4%.
However, declining ratings due to persistent cord-cutting continued to hurt traditional media companies in 2018. Consumers unfavorable disposition toward advertising also hit the industry hard.
Nevertheless, rapid technological advances and evolution of distribution platforms continue to lead to frequent changes to the media industry. Moreover, increase in Internet penetration and smartphone adoption is expected to aid media stocks reach a global audience by providing variety of content in 2019.
Further, scope for cross promotional content may help the companies reduce cost while attracting subscribers.
Streaming Service Providers Disrupting Media Landscape
Streaming services like Netflix (NFLX - Free Report) , Hulu, HBO and Amazon Prime are spending aggressively on content. Higher production values, innovative content and growing involvement of Hollywood stars are the key catalysts driving subscriber base expansion.
However, stiff competition from these streaming platforms is negatively impacting traditional broadcast and cable programming companies’ subscriber base.
In order to stay relevant, traditional media companies are now following the path of streaming platforms. Media giants like Disney (DIS - Free Report) , and Sinclair Broadcast Group are set to launch their own streaming services in 2019. The immense growth opportunity is also attracting non-media companies like AT&T and Apple.
In order to cater to the growing preference for digital and subscription services in place of linear pay television, most of the media companies are now offering a variety of alternative packages, including skinny bundles, at lower costs than traditional offerings.
However, increasing programming costs and retransmission fees are expected to drag down profitability of industry participants.
Media Consolidation to Continue in 2019
Year 2018 saw a series of consolidations in the media industry. After a prolonged regulatory battle, AT&T finally succeeded in acquiring Time Warner. The acquisition bought HBO under the telecom giant’s portfolio. Additionally, Comcast (CMCSA - Free Report) acquired European pay-TV giant Sky Plc after a bidding process against 21st Century Fox.
Another high-profile acquisition, 21st Century Fox by Disney, is expected to be completed in early 2019. As per regulatory requirement, Disney has to divest 22 regional sports networks (RSNs) including YES Network, which it is acquiring from Fox. Reportedly, Sinclair Broadcast in partnership with CVC Capital is eyeing the assets. Amazon has also shown interest in YES Network.
Moreover, Nexstar Broadcasting Group (NXST - Free Report) recently announced an agreement to acquire Tribune Media for $6.4 billion. The transaction is expected to close late in the third quarter of 2019.
How to Make the Right Pick?
Given the existence of a number of industry players, finding media stocks that are likely to continue their winning streak in 2019 can be a daunting task.
Zacks’ proprietary methodology comes in handy while zeroing in on these stocks. Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer good investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here we pick four stocks that have outperformed the S&P 500 year to date. Each of these stocks has a Zacks Rank #2 and market capital of more than $100 million.
Our Picks
Silver Spring based Discovery is expected to benefit from its solid content portfolio post the acquisition of Scripps Networks. The stock has a market capital of $14.85 billion.
Over the past 30 days, the Zacks Consensus Estimate for its 2019 earnings has increased 0.29% to $3.46, indicating year-over-year growth of 59.7%.
Discovery, Inc. Price and Consensus
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Media stocks did well in 2018 courtesy of strong demand for political advertising in the United States related to mid-term election, increasing investments in original content and focus on providing quality entertainment.
The solid performance, to an extent, is reflected in Invesco Dynamic Media ETF’s (PBS) year-to-date return of 7.9% against the S&P 500 composite’s decline of 1.4%.
However, declining ratings due to persistent cord-cutting continued to hurt traditional media companies in 2018. Consumers unfavorable disposition toward advertising also hit the industry hard.
Nevertheless, rapid technological advances and evolution of distribution platforms continue to lead to frequent changes to the media industry. Moreover, increase in Internet penetration and smartphone adoption is expected to aid media stocks reach a global audience by providing variety of content in 2019.
Further, scope for cross promotional content may help the companies reduce cost while attracting subscribers.
Streaming Service Providers Disrupting Media Landscape
Streaming services like Netflix (NFLX - Free Report) , Hulu, HBO and Amazon Prime are spending aggressively on content. Higher production values, innovative content and growing involvement of Hollywood stars are the key catalysts driving subscriber base expansion.
However, stiff competition from these streaming platforms is negatively impacting traditional broadcast and cable programming companies’ subscriber base.
In order to stay relevant, traditional media companies are now following the path of streaming platforms. Media giants like Disney (DIS - Free Report) , and Sinclair Broadcast Group are set to launch their own streaming services in 2019. The immense growth opportunity is also attracting non-media companies like AT&T and Apple.
In order to cater to the growing preference for digital and subscription services in place of linear pay television, most of the media companies are now offering a variety of alternative packages, including skinny bundles, at lower costs than traditional offerings.
However, increasing programming costs and retransmission fees are expected to drag down profitability of industry participants.
Media Consolidation to Continue in 2019
Year 2018 saw a series of consolidations in the media industry. After a prolonged regulatory battle, AT&T finally succeeded in acquiring Time Warner. The acquisition bought HBO under the telecom giant’s portfolio. Additionally, Comcast (CMCSA - Free Report) acquired European pay-TV giant Sky Plc after a bidding process against 21st Century Fox.
Another high-profile acquisition, 21st Century Fox by Disney, is expected to be completed in early 2019. As per regulatory requirement, Disney has to divest 22 regional sports networks (RSNs) including YES Network, which it is acquiring from Fox. Reportedly, Sinclair Broadcast in partnership with CVC Capital is eyeing the assets. Amazon has also shown interest in YES Network.
Moreover, Nexstar Broadcasting Group (NXST - Free Report) recently announced an agreement to acquire Tribune Media for $6.4 billion. The transaction is expected to close late in the third quarter of 2019.
How to Make the Right Pick?
Given the existence of a number of industry players, finding media stocks that are likely to continue their winning streak in 2019 can be a daunting task.
Zacks’ proprietary methodology comes in handy while zeroing in on these stocks. Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer good investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here we pick four stocks that have outperformed the S&P 500 year to date. Each of these stocks has a Zacks Rank #2 and market capital of more than $100 million.
Our Picks
Silver Spring based Discovery is expected to benefit from its solid content portfolio post the acquisition of Scripps Networks. The stock has a market capital of $14.85 billion.
Over the past 30 days, the Zacks Consensus Estimate for its 2019 earnings has increased 0.29% to $3.46, indicating year-over-year growth of 59.7%.
Discovery, Inc. Price and Consensus
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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