Disney, CBS, Viacom Shares Start Off 2011 With Gains
NEW YORK -- The new year kicked off well for several big entertainment industry stocks as they outpaced the broader market in January.
"The large-cap entertainment conglomerates have nicely outperformed the S&P 500 in 2011 year-to-date, up 5.8 percent (7.1 percent excluding Time Warner) vs. 3.5 percent for the S&P 500 as the market anticipates strong year-end earnings largely driven by political and auto advertising," Evercore Partners analyst Alan Gould said late Friday.
Once stocks finished the opening month of 2011 on Monday, the broad-based S&P 500 was up 2.3 percent. Walt Disney handily beat that with a 3.6 percent year-to-date gain to close Monday at $38.87; shares of CBS Corp., the biggest gainer of 2010, were up 4.1 percent at $19.83; and Viacom shares marked a 4.9 percent improvement to $41.55.
Among other media and entertainment giants, News Corp. was also up in January, but only 1 percent, slightly underperforming the broader market. The stock also had a weaker 2010 than its peers amid concerns about the future of social network MySpace, a bid for full control of U.K. satellite operator BSkyB and other issues.
Meanwhile, Time Warner, whose stock analysts say has been held back by questions about ratings trends at some of its cable networks and the outlook for HBO amid cord-cutting fears, is down 2.2 percent so far this year, opening 2011 on a weaker note.
In contrast, Netflix, which has been a focus for Time Warner CEO Jeff Bewkes, who has warned about making too much content available to the firm's streaming video service for too little money, hit all-time highs in January and is up nearly 22 percent year-to-date despite warnings of some analysts that it has run up too much. The stock on Monday closed at $214.08.
But Sony is the main big-name industry laggard so far in 2011, having lost 7.4 percent in January of its U.S. market value.
Wall Street observers expect that the latest quarterly financials from entertainment conglomerates and conference call color commentary on the advertising market outlook in particular will affect where stocks go from here.
Nomura analyst Michael Nathanson, for one, is optimistic. "We see more upside for group," he said. He likes Disney, Viacom, CBS and News Corp. right now.
Meanwhile, Credit Suisse analyst Spencer Wang also predicts advertising improvement in quarterly earnings reports but recently maintained an "underweight" rating on the U.S. entertainment sector "given our concern that risks from over-the-top Internet video services and cord cutting could weigh on media valuation multiples."