Commentary: Spring-time for media stocks
Showbiz 50 shines in AprilApril was a rare month on Wall Street: Media stocks have outpaced the general markets, doing better even than many tech stocks, which have led a seven-week rally.
The Hollywood Reporter Showbiz 50 index jumped 13.8% in April, better than the Nasdaq (up 12.3%), the S&P 500 (up 9.4%) and the Dow (up 7.3%).
Leading the Showbiz 50 were some previously beaten-down stocks: TV station operator Belo gained 179% in April to $1.70, Warner Music Group was up 129% to $5.38 and CBS gained 83% to $7.04.
In mid-April, Goldman Sachs removed Warner Music Group from its Americas Sell List and upgraded the stock to neutral, calling the company the "best house in a more stable neighborhood."
The analyst, Ingrid Chung, raised her price target from $1.75 to $3.50, which is still 35% less than where the stock closed at the end of April.
Chung says music-industry trends are stabilizing after six months of sharp declines, that WMG management has engaged in "superior execution" and that the company will benefit from variable pricing of digital tracks.
As for Belo, the operator of 20 TV stations has been on a tear since bottoming at 47 cents on March 3. Zacks Investment Research called it a #1 Rank stock on April 13 at 81 cents, and shares have more than doubled since.
On Thursday, Belo posted a $9 million first-quarter profit , compared with a loss of $15 million a year ago. Helping were cost reductions that included the loss of 150 jobs, a 5% salary cut for some executives and a suspension of the company's 401(k) matching plan.
Only three stocks among the Showbiz 50 lost ground in April: World Wrestling Entertainment was off 7%, Lionsgate was down 3% and Regal Entertainment fell 3%.
Regal's monthly loss came largely on Thursday when the nation's largest movie-theater chain reported uninspiring first-quarter metrics, including per-screen boxoffice receipts that were flat compared with a year ago even as the industry as a whole is reporting about a 2% rise.
Merriman Curhan Ford analyst Eric Wold on Thursday reiterated his "buy" recommendation and predicted Regal stock could trade from $15.75-$19.50; it ended the month at $13.05.
Wold cited Regal's 5.6% dividend yield, willingness among moviegoers to pay a premium for 3-D and the fact that, even during tough economic times, moviegoers haven't reined in their spending on snacks.
A decline in the stock price of WWE in April is ironic given that the company issued a news release April 6 touting a 4.2% first-quarter rise in its shares, and it boasted that it outperformed such entertainment stalwarts as DreamWorks Animation, Lionsgate, Marvel, Time Warner, Viacom, Disney and News Corp.
WWE shares, though, have dropped steadily ever since, leading to the stock being the Showbiz 50 index's worst performer in April. The deep decline has also led to an outsize dividend yield of 13.6%, however, assuming the company can maintain it.
Other notable analyst action in April included Goldman Sachs removing Dish Network from its Americas Buy List. The stock was up 19% in April.
Toward the end of the month, Pali Research analyst Richard Greenfield reduced some financial estimates for News Corp. and Disney, calling both stocks a "sell."
News Corp. shares rose 18% in April, and Disney shares advanced 20%.