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4 Stocks to Watch in a Prospering Entertainment Industry
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The Zacks Film and Television Production and Distribution industry is benefiting from a spike in demand for digital entertainment, fueled by lingering capacity and operational limitations in movie theaters, theme parks and cruise lines. Increased consumption of media, music and news over the web triggered by the work-and-learn-at-home wave has been a key catalyst for industry participants like News Corporation (NWSA - Free Report) , World Wrestling Entertainment , iQIYI (IQ - Free Report) and CuriosityStream (CURI - Free Report) . Companies have been focusing on a superior product strategy and prudent capital investments. Steady recovery in the advertising spending environment and resumption of production pipelines bode well for film and television production companies.
Industry Description
The Zacks Film and Television Production and Distribution industry comprises companies involved in film and TV production, distribution and exhibition. The main activities of the industry participants include the production and distribution of entertainment content to theaters, TV networks, video-on-demand platforms, streaming services and other exhibitors. Imax offers entertainment technology and specializes in motion picture technologies and presentations. Industry participants produce and distribute motion pictures for theatrical and straight-to-video releases besides TV programming. These players are heavily dependent on the box-office performance of their films, both domestically and internationally, the number of film releases and the ratings of TV shows.
3 Film and Television Production Industry Trends in Focus
Over-the-Top Services Gaining Prominence: Companies involved in content creation are looking to distribute content through over-the-top services to leverage the popularity of their franchises. With this, they are looking to provide exclusive content and a differentiated experience. However, streaming companies are increasingly producing original and award-winning feed to reduce licensing costs and excessive dependence on third-party content providers. This is likely to hurt industry participants’ content distribution strategy.
Binge-Watching Driving Consumption: Factors such as binge-watching, deepening Internet penetration and advancement in mobile, video, and wireless technologies have got viewers glued to small screens. In order to keep pace with new consumption patterns, industry participants are turning to digital content distribution. The emergence of digital capabilities is making consumer data easily available to companies. With the use of AI tools, production houses are gaining a better understanding of user preference. This is helping them produce content that strikes a chord with viewers. However, increasing spending on content and sales & marketing is hurting profitability due to stiff competition from streaming players.
Technological Advancement Aids Prospects: Exhibitors are turning to highly efficient and cost-effective technologies like laser-based projection systems to enhance image quality and the entire movie experience. Additionally, the use of technologies like motion seating, immersive audio systems and interactive movies among others is expected to enhance the viewing experience. The increasing adoption of AR and VR technologies bodes well for industry participants. However, the evolution of alternative motion picture distribution channels such as home video, pay-per-view, streaming services, video-on-demand, Internet and syndicated and broadcast television is hurting exhibitors.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Film and Television Production and Distribution industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #96, which places it in the top 38% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic on this group’s earnings growth potential. Since Nov 31, 2021, the industry’s earnings estimate for 2022 has moved up 56.3%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags S&P 500, Beats Sector
The Zacks Film and Television Production and Distribution industry has underperformed the Zacks S&P 500 composite but beat its own sector in the past year.
The stocks in this industry have collectively lost 38.2% compared with the S&P 500’s decline of 19.7% and the Zacks Consumer Discretionary sector’s decline of 43.1% over the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month price-to-sales (P/S), a commonly used multiple for valuing Film and Television Production and Distribution stocks, the industry is currently trading at 1.16X compared with the S&P 500’s 3.48X and the sector’s 1.79X.
Over the past five years, the industry has traded as high as 2.48X and as low as 0.92X, recording a median of 1.49X as the chart below shows.
Trailing 12-Month Price-to-Sales (P/S) Ratio
4 Film & Television Stocks to Watch Right Now
World Wrestling Entertainment: Shares of this Zacks Rank #1 (Strong Buy) company have risen 52.6% year to date. WWE has been gaining from the return of live events, as pandemic-led restrictions ease. You can see the complete list of today’s Zacks #1 Rank stocks here.
World Wrestling Management expects to generate record revenues in 2022, owing to ticketed live events, staging of additional large-scale international events, higher rights fees for flagship programs, Raw and SmackDown, along with monetization of new, original series.
For 2022, WWE guided adjusted OIBDA in the range of $360-$375 million, indicating 10-15% year-over-year growth. Markedly, WWE has been expanding its reach across platforms such as Peacock and Spotify and establishing new sponsors and product partners.
The Zacks Consensus Estimate for World Wrestling’s 2022 earnings has moved north by 3.2% to $2.57 per share over the past 30 days.
Price and Consensus: WWE
News Corporation: The company is benefiting from prudent strategic efforts, which include the ongoing digital transformation of the business, and investments in Digital Real Estate Services, Dow Jones and Book Publishing segments.
News Corporation has been diversifying revenue streams through strategic acquisitions and operational enhancement. It is optimistic about acquisitions of the OPIS and Base Chemicals businesses that are likely to enhance Dow Jones’ information services business.
News Corporation is well-positioned to grab opportunities generated from technology sharing across geographies and businesses, and bundled offerings of enriched content to consumers and advertising partners.
News Corporation’s shares have lost 23.4% year to date. The Zacks Consensus Estimate for this Zacks Rank #3 (Hold) company’s fiscal 2022 earnings has remained steady at 99 cents per share over the past 30 days.
Price and Consensus: NWSA
iQIYI: The company offers movies, television dramas, variety shows and other video content. Recently, the company entered into a definitive agreement with Douyin, pursuant to which it will license select content to Douyin for editing and distribution as short-form videos in the formats agreed by the two companies.
The company already has a huge subscriber base in China, which is one of the biggest consumer markets in the world. Strong demand for company-produced drama series, original movies and variety shows in international markets is a key catalyst in driving top-line growth in the near term.
iQIYI’s shares have declined 50.2% year to date. The Zacks Consensus Estimate for this Zacks Rank #3 company’s fiscal 2022 loss has remained steady at 4 cents per share over the past 30 days.
Price and Consensus: IQ
CuriosityStream: The company features more than 10,000 titles and has embarked on an original production and content acquisition plan. Continued strength in direct subscription revenues and contributions from program sales and sponsorships/advertising are expected to remain key catalysts.
The company is benefiting from its unique content distribution strategy through its solid partner base. Through the end of 2022, the company is expected to invest more than $188 million in original productions and acquired content. The company has invested over $15-20 million in acquisitions like One Day University and Learn25 and partnerships like Spiegel and Nebula, which brought additional content into the company’s content ecosystem.
The Zacks Consensus Estimate for this Zacks Rank #3 company’s 2022 loss per share has remained steady at $1.03 per share over the past 30 days. CuriosityStream’s shares have declined 78.9% year to date.
Price and Consensus: CURI
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4 Stocks to Watch in a Prospering Entertainment Industry
The Zacks Film and Television Production and Distribution industry is benefiting from a spike in demand for digital entertainment, fueled by lingering capacity and operational limitations in movie theaters, theme parks and cruise lines. Increased consumption of media, music and news over the web triggered by the work-and-learn-at-home wave has been a key catalyst for industry participants like News Corporation (NWSA - Free Report) , World Wrestling Entertainment , iQIYI (IQ - Free Report) and CuriosityStream (CURI - Free Report) . Companies have been focusing on a superior product strategy and prudent capital investments. Steady recovery in the advertising spending environment and resumption of production pipelines bode well for film and television production companies.
Industry Description
The Zacks Film and Television Production and Distribution industry comprises companies involved in film and TV production, distribution and exhibition. The main activities of the industry participants include the production and distribution of entertainment content to theaters, TV networks, video-on-demand platforms, streaming services and other exhibitors. Imax offers entertainment technology and specializes in motion picture technologies and presentations. Industry participants produce and distribute motion pictures for theatrical and straight-to-video releases besides TV programming. These players are heavily dependent on the box-office performance of their films, both domestically and internationally, the number of film releases and the ratings of TV shows.
3 Film and Television Production Industry Trends in Focus
Over-the-Top Services Gaining Prominence: Companies involved in content creation are looking to distribute content through over-the-top services to leverage the popularity of their franchises. With this, they are looking to provide exclusive content and a differentiated experience. However, streaming companies are increasingly producing original and award-winning feed to reduce licensing costs and excessive dependence on third-party content providers. This is likely to hurt industry participants’ content distribution strategy.
Binge-Watching Driving Consumption: Factors such as binge-watching, deepening Internet penetration and advancement in mobile, video, and wireless technologies have got viewers glued to small screens. In order to keep pace with new consumption patterns, industry participants are turning to digital content distribution. The emergence of digital capabilities is making consumer data easily available to companies. With the use of AI tools, production houses are gaining a better understanding of user preference. This is helping them produce content that strikes a chord with viewers. However, increasing spending on content and sales & marketing is hurting profitability due to stiff competition from streaming players.
Technological Advancement Aids Prospects: Exhibitors are turning to highly efficient and cost-effective technologies like laser-based projection systems to enhance image quality and the entire movie experience. Additionally, the use of technologies like motion seating, immersive audio systems and interactive movies among others is expected to enhance the viewing experience. The increasing adoption of AR and VR technologies bodes well for industry participants. However, the evolution of alternative motion picture distribution channels such as home video, pay-per-view, streaming services, video-on-demand, Internet and syndicated and broadcast television is hurting exhibitors.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Film and Television Production and Distribution industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #96, which places it in the top 38% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic on this group’s earnings growth potential. Since Nov 31, 2021, the industry’s earnings estimate for 2022 has moved up 56.3%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags S&P 500, Beats Sector
The Zacks Film and Television Production and Distribution industry has underperformed the Zacks S&P 500 composite but beat its own sector in the past year.
The stocks in this industry have collectively lost 38.2% compared with the S&P 500’s decline of 19.7% and the Zacks Consumer Discretionary sector’s decline of 43.1% over the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month price-to-sales (P/S), a commonly used multiple for valuing Film and Television Production and Distribution stocks, the industry is currently trading at 1.16X compared with the S&P 500’s 3.48X and the sector’s 1.79X.
Over the past five years, the industry has traded as high as 2.48X and as low as 0.92X, recording a median of 1.49X as the chart below shows.
Trailing 12-Month Price-to-Sales (P/S) Ratio
4 Film & Television Stocks to Watch Right Now
World Wrestling Entertainment: Shares of this Zacks Rank #1 (Strong Buy) company have risen 52.6% year to date. WWE has been gaining from the return of live events, as pandemic-led restrictions ease. You can see the complete list of today’s Zacks #1 Rank stocks here.
World Wrestling Management expects to generate record revenues in 2022, owing to ticketed live events, staging of additional large-scale international events, higher rights fees for flagship programs, Raw and SmackDown, along with monetization of new, original series.
For 2022, WWE guided adjusted OIBDA in the range of $360-$375 million, indicating 10-15% year-over-year growth. Markedly, WWE has been expanding its reach across platforms such as Peacock and Spotify and establishing new sponsors and product partners.
The Zacks Consensus Estimate for World Wrestling’s 2022 earnings has moved north by 3.2% to $2.57 per share over the past 30 days.
Price and Consensus: WWE
News Corporation: The company is benefiting from prudent strategic efforts, which include the ongoing digital transformation of the business, and investments in Digital Real Estate Services, Dow Jones and Book Publishing segments.
News Corporation has been diversifying revenue streams through strategic acquisitions and operational enhancement. It is optimistic about acquisitions of the OPIS and Base Chemicals businesses that are likely to enhance Dow Jones’ information services business.
News Corporation is well-positioned to grab opportunities generated from technology sharing across geographies and businesses, and bundled offerings of enriched content to consumers and advertising partners.
News Corporation’s shares have lost 23.4% year to date. The Zacks Consensus Estimate for this Zacks Rank #3 (Hold) company’s fiscal 2022 earnings has remained steady at 99 cents per share over the past 30 days.
Price and Consensus: NWSA
iQIYI: The company offers movies, television dramas, variety shows and other video content. Recently, the company entered into a definitive agreement with Douyin, pursuant to which it will license select content to Douyin for editing and distribution as short-form videos in the formats agreed by the two companies.
The company already has a huge subscriber base in China, which is one of the biggest consumer markets in the world. Strong demand for company-produced drama series, original movies and variety shows in international markets is a key catalyst in driving top-line growth in the near term.
iQIYI’s shares have declined 50.2% year to date. The Zacks Consensus Estimate for this Zacks Rank #3 company’s fiscal 2022 loss has remained steady at 4 cents per share over the past 30 days.
Price and Consensus: IQ
CuriosityStream: The company features more than 10,000 titles and has embarked on an original production and content acquisition plan. Continued strength in direct subscription revenues and contributions from program sales and sponsorships/advertising are expected to remain key catalysts.
The company is benefiting from its unique content distribution strategy through its solid partner base. Through the end of 2022, the company is expected to invest more than $188 million in original productions and acquired content. The company has invested over $15-20 million in acquisitions like One Day University and Learn25 and partnerships like Spiegel and Nebula, which brought additional content into the company’s content ecosystem.
The Zacks Consensus Estimate for this Zacks Rank #3 company’s 2022 loss per share has remained steady at $1.03 per share over the past 30 days. CuriosityStream’s shares have declined 78.9% year to date.
Price and Consensus: CURI