Commentary: Tech stocks shine in Q1

Sirius XM leads Showbiz 50 gainers

Most traditional media stocks were cold in the just-ended, exceedingly volatile first quarter, but new media was surprisingly hot.

Leading all gainers on The Hollywood Reporter Showbiz 50 index, for example, was the much-maligned Sirius XM Radio, up 192% to 35 cents. Third on the index was Netflix, up 44%.

Sirius XM's overperformance was because of renewed confidence on Wall Street that the company will survive without a bankruptcy that might have wiped out shareholders. Analyst David Joyce this month upped his long-term target on the stock to $1.25.

Netflix received a slew of late-month attention, spurred by the company's decision to increase its subscription fees for customers desiring Blu-ray Discs, news that had Netflix closing the quarter with a powerful two-day rally.

"Netflix has executed flawlessly recently," says Signal Hill analyst Todd Greenwald, who initiated coverage of the company with a "hold" rating. His concerns include competition from Redbox; subscribers who enjoy the watch-instantly digital feature so much that they might abandon DVDs; and a Blockbuster restructuring that could resurrect a once-formidable competitor.

There's no consensus on Netflix, though. Barclays Capital analyst Douglas Anmuth rates it "overweight," and Janney Montgomery Scott analyst Tony Wible calls it a "sell."

Other top-performing media companies in the quarter with a focus on digital technology included National CineMedia (up 30%), Apple (23%), Activision Blizzard (21%), Ascent Media (15%), Electronic Arts (13%), Google (13%), Yahoo (5%) and Dolby (4%).

Zacks Investment Research said this month it has zero "buy" recommendations in the consumer electronics space. It added that Apple could benefit from a strong trend in the smartphone market, but then again, any benefit there could be wiped out from declining revenue from computers and iPods.

Internet companies Google and Yahoo still play in one of the few advertising growth arenas, proof of which arrived on the final day of the quarter with the Advertising Revenue Report. The report, from the Interactive Advertising Bureau and PricewaterhouseCoopers, said full-year 2008 revenue crept 11% higher to $23.4 billion in the U.S., a record-setting sales figure for the fifth consecutive year.

Of nine online advertising categories, only two gained market share year-over-year: Search went from 42% in 2007 to 45% last year, and digital video rose from 2% to 3%.

Because it remains a tiny contributor, digital video notched the best growth, surging to $734 million last year compared with $324 million the year before.

Stocks that sat out a new-media rally in the quarter included TiVo (down 2%), Imax (down 4%), Avid Technology (off 16%) and THQ (off 27%).
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