Entertainment Midyear Stock Report: Streamers Soar, Sony Leads Conglomerates
Sony's lead would have been larger but for a 6 percent drop after announcing on Tuesday that it would raise money by issuing 92 million more shares of stock.
Tuesday marked the year's half-way point on Wall Street, and the trend is clear: It sure has paid to invest in streaming media.
Netflix is the obvious leader here, its shares having advanced 92 percent to $656.94 so far this year. But a primary competitor, Amazon.com, is up 40 percent to $434.09 thus far. Netflix recently announced a 7-1 stock split, which will make its shares more affordable to small investors.
The success of those two companies, though, can't be extrapolated to new-media in general, as Yahoo is off 22 percent on the year and Google is down 1 percent.
Video games have performed well, though not uniformly. Electronic Arts is up 41 percent and Activision Blizzard is up 21 percent, but Take Two Interactive Software is down 2 percent.
Social networking is better than average, as Facebook is up 10 percent while Twitter is up 1 percent, besting the fractional gain made by the S&P 500. Twitter shares had been down on the year but surged 6 percent on Tuesday on rumors the company might be available for purchase. Dick Costolo spent his final day as CEO of Twitter on Tuesday and co-founder and chairman Jack Dorsey takes over on an interim basis Wednesday.
Elsewhere in new media, TiVo shares are down 14 percent, Zynga is up 8 percent and Sirius XM Radio is up 7 percent. Pandora is off 13 percent while Apple is up 15 percent. Apple launched its music service on Tuesday, which will compete with Pandora, so the latter's stock has been trending down for several weeks.
Movie exhibition has been fairly scattershot with Carmike Cinemas and Regal Entertainment more or less mirroring the performance of the S&P 500's anemic move, while Cinemark is up 14 percent and Imax is up 30 percent. RealD, a maker of 3D technology and an Imax rival, is up 5 percent.
Of the Big Seven conglomerates, five are outperforming the S&P 500 while 21st Century Fox and Viacom are not. In order, their performance is as follows: Sony (up 39 percent); Walt Disney (up 21 percent); Comcast (up 5 percent); Time Warner (up 3 percent); CBS (up 1 percent); Viacom (down 13 percent); 21st Century Fox (down 15 percent).
21st Century Fox has been going through some major executive upheaval, beginning with Rupert Murdoch's announcement that sons James Murdoch and Lachlan Murdoch will become CEO and executive co-chairman, respectively, starting on Wednesday.
While Sony led the conglomerates, it would have done so by a larger margin, but the stock dropped 6 percent on Tuesday after the Japanese company announced it was raising $3.6 billion by issuing 92 million new shares in addition to a bond offering on Aug. 17. "The purpose of this fundraising is to secure funds to invest in growth and to strengthen Sony's financial base," the company said Tuesday.
Among the smaller content creators and distributors, Starz and AMC Networks are standouts, having advanced 51 percent and 28 percent, respectively, so far this year, while Lions Gate Entertainment is up 16 percent and DreamWorks Animation, recovering after a string of box-office disappointments, is up 18 percent. On the flipside, Discovery Networks is down 4 percent and Scripps Networks Interactive, parent of HGTV, DIY Network, Food Network and Great American Country is off 13 percent.
On Tuesday, Stifel analyst Benjamin Mogil reiterated his "buy" rating on Lions Gate and increased his target price by $3 to $42, in part due to speculation it might merge with Starz, which would give the mini-major studio more life beyond The Hunger Games film franchise. Lions Gate shares closed at $37.05 on Tuesday.
The same analyst on Tuesday reiterated his "hold" recommendation on Starz, but upped his fair value estimate to $47 from $40. Starz shares closed at $44.72 on Tuesday.
For the rest of the year, analyst Tuna Amobi at S&P Capital IQ is recommending shares of Lions Gate, Time Warner, Comcast, Netflix and Disney.
Disney recently increased its annual dividend and is benefiting from upgrades at its theme parks and some very lucrative film franchises, including Frozen, Avengers and Star Wars, Amobi says.
As for Comcast, a turnaround at NBCUniversal is "increasingly palpable" and at Time Warner the analyst is bullish on its "sizable international opportunities" as well as ongoing and future deals that allow Netflix, Amazon.com and others to stream the conglomerate's valuable TV and movie content.