Sony, Discovery Among Stocks Hitting 52-Week Lows Amid Global Sell-Off
Lionsgate, Cinemark, Dish and Twitter are among the other stocks setting new lows, while other entertainment industry stocks also fall sharply.
Amid the latest broad-based sell-off in global stock markets on Wednesday, some entertainment industry stocks hit 52-week lows.
Sony Corp. went as low as $20.16 during the first half of the trading day, falling below the 52-week low of $20.66 that it had set about a year ago. As of 12:30 p.m. ET, the stock was down more than 9 percent. Discovery Communications early in the trading session set a 52-week low of $24.70, dropping below the previous low of $25.02, established on Oct. 2. As of 12:30 p.m. ET, the stock was down more than 4 percent.
Lionsgate's stock had already set a 52-week low of $27.47 on Friday, followed by $27.38 this week. It dropped further on Wednesday, going as low as $26.54. As of 12:30 p.m. ET, it was down more than 4.5 percent.
Investors look at 52-week highs and lows as part of their analysis of a stock's outlook.
Outside big content players, exhibitor Cinemark Holdings' stock also set a 52-week low of $29.28 on Wednesday. It was down 4 percent as of 12:30 p.m. ET. Satellite TV giant Dish Network hit a new low at $46.64, John Malone's international cable giant Liberty Global did so at $32.11, while Barry Diller's IAC did so at $49.11. And Twitter shares were down more than 3 percent mid-session after hitting a 52-week low of $15.48 earlier in the day.
Other entertainment-related companies that saw their stocks hit their lowest prices for the past year were TiVo and Redbox owner Outerwall.
Many stocks in other sectors on Wednesday also dropped to 52-week lows as the broad-based S&P 500 index was down 3.4 percent as of 12:30 p.m. ET and hit its lowest levels since late 2014. Concerns about an economic slowdown in China, lower oil prices and slightly rising U.S. interest rates combined to weigh on investor confidence in growth ahead.
Media and entertainment investors have started expressing concern about a possible U.S. recession, which typically leads to TV advertising spending declines, hurting a key revenue source. In addition to macro-economic and broader market trends, sector stocks have also been struggling amid fears of continued cord-cutting and declining TV ratings.
Hollywood stocks that didn't set 52-week lows also generally followed the market lower on Wednesday. Even Netflix, despite beating most forecasts in its latest earnings report on Tuesday afternoon, saw its stock decline more than 6.7 percent as of midday Wednesday.
Among those coming near 52-week lows were shares of Walt Disney, which fell below $90.70, compared to their 52-week low of $90.00 hit on Aug. 24, and the stock of Starz, which fell below $29.00, compared to its year-low of $28.16.
CBS Corp.'s stock was down 6.6 percent as of 12:30 p.m. ET; 21st Century Fox and Viacom were down 5.2 and 4.9 percent, respectively; Time Warner was off 3.5 percent; and NBCUniversal parent Comcast was down 3.1 percent.
Among other sector players, AMC Networks shares fell 3.3 percent, and DreamWorks Animation shares dropped 3.7 percent.
The stocks of many media and entertainment companies underperformed the broader stock market last year. Amid a broad-based market drop early this year, many of those not setting new 52-week lows are now trading closer to them.
Media and entertainment sector stocks as a group fell about 13 percent in 2015 in a flat market, Morgan Stanley analyst Benjamin Swinburne said Tuesday in a report. "Valuation is tempting, but downside risk to estimates remains from slower subscription revenue growth and higher content costs," he said about entertainment stocks.
Reiterating his "cautious" view on Hollywood and media names, Swinburne wrote: "Media stocks are at a discount to the market, but we continue to believe most TV networks are over-earning and face falling returns over time due to slowing top-line and competition for content."
He continued: "Near-term, we favor ad exposure (CBS, AMC Networks). Structurally, we prefer content suppliers (DreamWorks Animation) and [ad] agencies (IPG)." Swinburne also cited 21st Century Fox as a stock he likes due to "stable advertising trends for now, confidence in the retransmission fee growth outlook and ... compelling valuation relative to organic growth."