With 2019 in the record books, Wall Street has started discussing what Hollywood and related stocks are “buys” for the new year.
Amid the streaming wars, set to kick into a higher gear with the spring launches of Comcast/NBCUniversal’s Peacock and AT&T/WarnerMedia’s HBO Max, continued cord-cutting and debate about how TV advertising trends will shape up beyond the Summer Olympics and elections, analysts’ picks are varied as in most years.
CFRA Research analyst Tuna Amobi told The Hollywood Reporter that Walt Disney was “a favorite pick for 2020” for him. “We believe Disney has amassed some key building blocks as it systematically pivots to a direct-to-consumer strategy on the heels of the Fox entertainment acquisition, further bolstering a very robust trove of film and television and film franchises,” he explained in a recent report.
Evercore ISI’s Vijay Jayant likes ViacomCBS going into 2020. He launched coverage of the merged company with an “outperform” rating and $51 price target in December. “The media landscape has radically changed, but the appetite for quality content has never been higher,” he wrote in a report.
Calling it “a content powerhouse in an era of peak content,” Jayant said its shares look “attractive for a company with quality content (about 20 percent of U.S. TV viewership share; $11 billion book value of content assets), plenty of integration-related tailwinds (cost synergy target looks materially conservative; revenue synergy opportunities abound), favorable revenue mix shift (advertising/subscription; linear/digital), a strong balance sheet and a management team with a track record of capital returns ($20 billion returned between 2014-2018 across the two companies through buybacks and dividends).”
Needham & Co. analyst Laura Martin’s recommendation for 2020 also has to do with the streaming wars: Roku. “I think it’s going to have another great year,” she told THR.
On Dec. 3, she maintained her “buy” rating on Roku shares, but boosted her price target by $50 to $200. “In 2020, Roku’s key upside valuation driver will be accelerating subscription SVOD revenues, which lowers investment risk,” she wrote in her report. “Additionally, Disney+, Apple+, Peacock/Comcast and HBO Max/AT&T should accelerate customer acquisition spending, and Roku is a key beneficiary owing to its installed base of 32 million U.S. connected-TV homes.”
Concluded Martin: “In the U.S., we believe YouTube is the winning aggregator of user-generated videos, and Roku will be the winning aggregator of TV and films.”
MKM Partners in a year-end report said its entertainment industry stock pick for the new year is World Wrestling Entertainment. “2020 marks a significant inflection point for WWE with its new five-year contract for Raw and Smackdown in the U.S. and its largest international markets,” analyst Eric Handler explained in the report. “The step-up in value from these rights deals should produce an estimated $600 million (+70 percent) in revenue in 2020, up from more than $350 million in 2019. Furthermore, the high-margin nature of this revenue should serve as the key driver in adjusted operating income before depreciation and amortization, rising in 2020 to more than $400 million, double its level in 2019.”
He also predicts “a reacceleration” in subscriber growth for the WWE Network streaming service, helped by the expected launch of several tiers, including a free one, as well as new sponsorship opportunities.
