Italy's Mediaset, U.K.'s ITV Among Big European Entertainment Stock Gainers of 2013
Silvio Berlusconi-founded Italian media empire Mediaset, U.K. TV giant ITV and German pay TV company Sky Deutschland were among the European entertainment industry stocks that posted strong gains in 2013.
German TV giant ProSiebenSat.1 and German media powerhouse Bertelsmann's RTL Group also posted solid gains, while French entertainment and telecom conglomerate Vivendi and U.K. pay TV titan BSkyB posted more modest upticks.
Italy's Mediaset, the biggest laggard among big European entertainment sector stocks in 2012, finished the year up 120.1 percent at $4.75 (€3.45) as its shares rose like phoenix from the ashes. The stock set a 52-week high of €3.99 in 2013 amid improving advertising trends. More recently, the stock has also benefited from plans to merge the firm's Italian and Spanish pay TV businesses.
Among other stock winners of 2013, ITV shares gained 84.4 percent to close the year at $3.15 (1.94 pounds). It set a 52-week and all-time high of 1.97 pounds during the year as the company continued to grow its content arm ITV Studios.
Sky Deutschland's stock had closed 2012 at $6.17 (€4.48) and finished 2013 at $11.02 (€8), up 78.6 percent. That was near its 52-week high of €8.19. That meant the stock's value nearly tripled over the past year. The company, in which Rupert Murdoch's 21st Century Fox owns a majority stake, has seen continued operating improvements.
Meanwhile, ProSieben shares rose 67.1 percent in 2013 after the sale of its Nordic unit to Discovery Communications was agreed late in 2012 in a $1.7 billion deal. The stock set a 52-week high of €36.34 on the final trading day of 2013. And European broadcast giant RTL Group, part of German media powerhouse Bertelsmann, finished the year up 23 percent.
In comparison, the Stoxx 50 index of European blue-chip stocks rose 17.9 percent in 2013, showing that many big sector stocks outperformed the broader index.
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But some entertainment stocks saw smaller gains. For example, French entertainment and telecom conglomerate Vivendi gained 13 percent to finish the year at $26.38 (€19.16), near its 52-week high of €19.35. The stock has benefited from plans to separate its media and entertainment businesses, including Universal Music Group, from its telecom assets in 2014.
And U.K. pay TV giant BSkyB, in which 21st Century Fox owns a 39.9 percent stake, saw its stock rise less than the broader index with a 10 percent gain to end 2013 at $13.98 (8.44 pounds). Increasing competition from telecom giant BT for sports TV rights has been a key factor weighing on the stock in 2013.
Going into 2014, Sanford C. Bernstein analyst Claudio Aspesi told THR: "The broadcasting stocks now look expensive, and the likely shape of the ad recovery in 2014 and beyond may not prove sufficient to justify the current prices."
He likes the stock of advertising conglomerate WPP. "Ad numbers are still going up, the valuation is reasonable, and the global exposure also helps," he explained. "Also, the U.K. market is expected to do well, and WPP is much more exposed to it than any other global ad agency. Finally, investors are still wary about the Publicis Omnicom deal, and WPP has attracted investors as an alternative to those two stocks."
Liberum Capital analyst Ian Whittaker still likes U.K. broadcaster ITV though. "We are 30 percent ahead of [earnings] consensus for 2014, so think the market estimates have to come up significantly," he told THR. "Plus, we are very positive on the business model, cyclically (especially going into 2014) and structurally."
As for the broader European entertainment sector, he predicted that "there is still upside" for stocks. "The fundamentals of the sector are stronger now than going into the downturn as many of these companies have been forced to reinvent themselves, so they are much better quality companies now," Whittaker explained.