European Entertainment Stocks Mostly Drop in First Half, Brexit Will Remain Key Topic

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Analysts say the Brexit fallout will remain an important driver of markets as ITV, Sky, Vivendi, Mediaset, ProSieben and others are down midyear, with Pinewood a rare gainer.

Most European entertainment industry stocks were set to finish the first half of 2016 lower amid the Brexit, economic doubts and sector challenges.

Looking ahead, fallout from the Brexit, which has hit stocks significantly in recent days but fears of which had affected markets even before the referendum last week that made a future U.K. exit from the European Union official, will remain a major driver of stocks, according to analysts. "The key thing will be how the European economies react to the Brexit vote," Liberum Capital analyst Ian Whittaker tells The Hollywood Reporter. That is "the key question at the moment."

In the U.K., TV giant ITV's stock as of Thursday noon stood at £1.750, or $2.35, down 37 percent compared with its year-end 2015 close of £2.765. The stock lost 20 percent of its value alone on Friday following the U.K.'s Brexit vote.

Pan-European pay TV giant Sky saw its shares lose 25 percent of their value year-to-date as of Thursday despite continued subscriber growth. As of midday Thursday, the stock was trading at £8.44, or $11.35. 21st Century Fox owns a 39 percent stake in Sky, which operates pay TV platforms in the U.K., Ireland, Italy, Germany and Austria.

Producer and distributor Entertainment One, which is listed in London, was trading at £1.65, or $2.22, down just 1 percent. And U.K. studio facilities operator Pinewood Group was trading at £5.33, or $7.17, up 22 percent, making it a rare gainer year-to-date. Analysts said the stock has benefited from the company's exploration of strategic alternatives.

In continental Europe, German TV giant ProSiebenSat.1 and German media powerhouse Bertelsmann's RTL Group saw their stocks go in the same direction. ProSieben shares was down 17 percent for the year as of Thursday evening at €38.80 ($43.12), while RTL was down 5 percent at €73.51 ($81.70).

The stock of Italy's Mediaset, meanwhile, was, as of Thursday, down 17 percent for the year at €3.16 ($3.51). And in France, Vivendi — owner of pay TV firm Canal Plus, Universal Music Group and other businesses — also was down for the year. As of midday Thursday, its shares were 15 percent lower at €16.90 ($18.78).

At the midyear mark, Whittaker's top stock pick remains ITV. "Nothing has changed with the fundamentals and, even if we did assume an advertising decline of post-Lehman’s proportions, ITV would still look cheap with a very attractive dividend yield," he said in a report this week about a Brexit-driven sell-off. "The decline in the share price and the fall in sterling also potentially increases the chances of M&A activity." He reiterated his "buy" rating on the stock.

Whittaker also is "positive" on European TV companies in general, including ProSieben, RTL, Mediaset and Mediaset Espana, with the exception of French companies.


 

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