Hollywood Stocks End 2013 on High Note

2:42 PM PST 12/30/2013 by Georg Szalai

Shares of several entertainment conglomerates hit all-time highs ahead of the final trading day of the year that saw sector giants and studios post strong gains.

Hollywood stocks had another strong year in 2013, with many setting new all-time highs on Monday ahead of the last trading day of the year, which had started with a slew of 52-week highs.

Gains in big entertainment stocks also outperformed the broad-based S&P 500 stock index, which was up 29.1 percent year-to-date as of Monday's stock market close. Analysts have cited continued advertising revenue and network carriage fee growth, new retransmission consent revenue and continued digital licensing revenue as key financial growth drivers for the sector in 2013.

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The stock of CBS Corp., one of the top performers in recent years, led the Hollywood pack in 2013, gaining 67.3 percent for the year to Monday when it closed at $63.66 after setting a high of $64.06 intra-day. That was its highest price since the Viacom-CBS split in 2006.

Viacom's stock on Monday also hit its highest price since at least the split – $87.19. It finished the trading session at $87.15, up 65.2 percent from the 2012 closing price of $52.74. Like CBS, Viacom is controlled by Sumner Redstone.

Walt Disney's stock also hit an all-time high of $76.54 on Monday before closing at $76.23, up 53.1 percent for the year

Early on Monday, Guggenheim Securities analyst Michael Morris had raised his Disney stock from "neutral" to "buy" and boosted his price target by $10 to $87. "Enthusiasm for the company's 2015-16 catalysts (Marvel/Pixar/Star Wars films and products, Shanghai park) has grown earlier than we anticipated in our [October] initiation, but we see no reason it will slow," he wrote in a report. "Both Frozen and Thor 2 have performed well … supporting the strengthening content story." 

The stock of cable giant Comcast, the owner of entertainment firm NBCUniversal, also set an all-time high of $52.02 Monday. It closed at $51.87, up 38.8 percent for the year.

Meanwhile, U.S. shares of Sony Corp. closed Monday at $17.46, up 55.9 percent for the year, driven in part by activism from large shareholder Daniel Loeb. The stock's 52-week high stands at $23.38.

The stocks of Time Warner and 21st Century Fox also closed near highs on Monday. TW ended the trading session at $69.67, up 45.7 percent for the year-to-date. And Fox has also gained since its first trade following the midyear split of Rupert Murdoch's media and entertainment empire. Its Monday closing price of $35.02 means a gain of 21.7 percent since the split.  

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Among studio stocks, which have benefited from increased investor confidence, Lionsgate posted strong gains in 2013, closing Monday at $31.75, up 93.6 percent from the end of 2012. The stock had hit an all-time high of $37.81 in October.

Lionsgate shares saw strength for much of the year ahead of the release of the Hunger Games sequel and amid analysts' confidence in the company's growing TV business and its ability to find new franchises.

Meanwhile, the stock of Dreamworks Animation rose 115.7 percent year-to-date to close Monday at $35.74 after setting a 52-week high of $36.01 earlier in the day.

Janney Capital Markets analyst Tony Wible has predicted an inflection point for the studio's financials. "We see DWA benefiting from a broader film slate, negative cost savings, domestic TV fee savings, a possible TV network, better international film performance and strategic benefits tied to the 21st Century Fox relationship, the acquisition of Classic Media, and the Oriental DreamWorks partnership," he said in a recent report.

For 2014, analysts mostly expect more selective gains given the entertainment stock growth of recent years.

"Shares in our large-cap media universe collectively have been strong outperformers over the past two years, yet we still see reasons to remain invested in media," Guggenheim Securities analyst Morris said in a recent report. But he suggested investors will have to more carefully pick the entertainment stocks they invest in amid the recent strength.

Email: Georg.Szalai@THR.com
Twitter: @georgszalai

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