Big Entertainment Stocks Kick Off 2011 With Gains
NEW YORK -- Shares of several entertainment conglomerates have started off the year with a bang.
Viacom, CBS Corp. and Disney shares have in recent days hit 52-week highs and reached price levels not seen in a few years as analysts say investors have gained new comfort in the economic and advertising outlook. Some also point to last week's Consumer Electronics Show, where new killer applications threatening the established entertainment eco-system went lacking.
"There has been increasing confidence in the economy and ad market as well as a sense that over-the-top video will not be that disabling to business models," Wunderlich Securities analyst Matthew Harrigan said.
"We are still running 6% to 8% below peak ad spending levels," Davenport & Co. analyst Michael Morris added. "So I can still be optimistic on media names, because they are still catching up."
His take on CES this year is that there was no huge attention-grabbing new technology. "No news is good news for the existing eco-system," Morris said. "I think people felt that was a little bit of a relief."
CBS, Viacom and Disney also were among the big-name media stocks mentioned as stock picks for 2011 by analysts recently surveyed by The Hollywood Reporter.
All this may have contributed to the run-up in key entertainment stocks so far this year.
Class B shares of Viacom reached a 52-week high of $41.74 on Wednesday before closing up 0.6% on the day to $41.22. This year, Viacom shares are up 4.1%.
Similarly, CBS shares hit a 52-week high of $20 on Wednesday and finished up nearly 1% at $19.78. Year-to-date, the stock has gained 3.8%.
Shares of Disney, after a 16% gain in 2010, managed a 10-year high of $40 on Jan. 5. Among other Wall Street expressions of love, Goldman Sachs early this year added Disney to its "conviction buy" list, noting a rebound at the company's theme parks division and improving financials at its cable networks.
Disney shares have declined slightly since but closed Wednesday's trading session at $39.17, up 4.4% in 2011.
Time Warner is inching closer to its 52-week high of $34.07, which it established at the end of April. On Wednesday, the stock touched $34.04 before closing at $33.69.
News Corp. shares finished Wednesday at $16.16, well off the company's 52-week high of $18.80, established in late April. And Sony shares, at $36.40 as of Wednesday evening, also are well below their 52-week high of $40.45 from late March.
Thanks to an economic and advertising recovery, 2010 was a year of robust stock gains for most big entertainment stocks. CBS shares, up 35%, and Viacom's stock, up 33%, were the biggest gainers among conglomerates.
So, will the stocks that have hit highs need a breather following the recent run-up? Three analysts say no.
"I see more upside," said Morris, who Wednesday upgraded Viacom shares from "neutral" to "buy" and boosted his price target by $12 to $50. "There is a creative renaissance," he said about continued ratings momentum at MTV fueled, among others, by the juggernaut Jersey Shore.
"I still like Viacom, because advertising has not yet caught up with improvement in MTV ratings, and Paramount is also doing well," Harrigan echoed.
While some investors may turn more cautious on some big entertainment stocks amid their run-on, Miller Tabak analyst David Joyce also predicts more room for upside.
"For the first half of the past decade, [stock price] multiples were usually in the low-double digits," he said. "They are just in the 7.5 times-10 times range on 2011 [results] now."