Digital Disrupt: U.S. Entertainment Stocks Ride Trump Wave

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Big media conglomerates saw Trump's plans for tax reform and deregulation lift share prices in the first quarter of 2017.

Donald Trump's bad-mouthing of cable and print news giants didn't dent share prices for big media conglomerates during the first quarter of 2017.

Legislative chaos in Washington has been good for Hollywood, as its biggest players continue to navigate a quickly shifting media landscape. Not even Trump's failure to pass healthcare reform, likely to make it harder to advance his tax reform and deregulation plans in Congress, has halted recent share price ascents.

So The Hollywood Reporter took a look at which entertainment stocks to follow in the coming quarter, ending June 30, especially as Wall Street watchers anticipate a merger binge under a pro-business Trump administration. For starters, investors are betting Trump's FCC rolling back net neutrality will make winners of Internet providers.

Cable and broadband giant Comcast, which saw its stock end 2016 priced at $35.22 a share, rose to $38.29 in mid-February as U.S. financial markets hit new highs, before trading up 12 cents to $37.62 on Friday morning. Deutsche Bank analyst Bryan Kraft in an investors note this week said he expects the NBCUniversal owner to do well by recently-installed FCC chairman Ajit Pai.

"In addition to continued strong fundamentals, we expect Comcast to be a direct beneficiary of potential tax reform and deregulation in communications and media," Kraft wrote. Telecom giant AT&T, which is looking to get vertical by merging with Time Warner, saw its stock have a bumpy ride during the first quarter on concerns Trump may block the acquisition.

But as Trump nominates as his antitrust enforcer Makan Delrahim, who previously said he has little problem with the AT&T-Time Warner merger, shares in the phone giant rebounded this week to trade on Friday up 3 cents to $41.73, down only 2 percent from where they started the year.

By contrast, stock in Verizon, under pressure to do its own Time Warner-size merger, slid 9 percent during the first quarter to close Friday at $48.90, down 16 cents on the day. And Charter Communications saw its shares surge nearly 10 percent in January on reports of a possible takeover by Verizon.

Charter stock traded Friday up $1.68 to $329.80, or a 14 percent rise during the first three months of 2017. Netflix also saw its shares rise steadily during the first quarter on recent strong subscriber growth for its mousetrap designed for the cord-cutting age.

Stock in Netflix closed Friday at $147.66, down 40 cents, yet near a recent all-time high of $148.07. And Viacom had a 32 percent upside in its stock during the quarter, as it traded down 10 cents on Friday at $46.26.

All eyes are on how CEO Bob Bakish executes his turnaround strategy now that a CBS/Viacom deal is likely off the table. Elsewhere, Disney stock rose 6.7 percent in value during the quarter, or up 33 cents to $113.51 on Friday.

Investors are looking past concerns about ESPN to Disney's film and TV content reaching far and wide in the modern media age. Evercore media analyst Vijay Jayant in a recent note argued Disney channels are on virtually all cable TV-type online platforms, making it likely investors will see "some moderation in the negative subscriber impacts its channels have faced from cord-cutting/shaving."

And Lionsgate saw its stock ride a movie roller coaster in the first quarter. First it got a big valuation lift from La La Land's box office success ahead of the Oscars, before trending down through February and March.

But a solid box-office start for the Power Rangers big-screen reboot had shares sharply rebounding in late March to trade Friday virtually unchanged on the day at $26.63, and even with where they started 2017. Drexel Hamilton analyst Tony Wible in a recent note argued investors "may be rotating to underperforming names if they feel the ecosystem is stabilizing."

That's benefiting pay TV players whose share prices rose during the first quarter, even as they came off mid-February peaks in stock valuations. These include gains for AMC Networks, with a 8.7 percent stock upside, Discovery Communications up 3.7 percent and Scripps Digital Networks jumping 9 percent.

Not all Wall Street watchers are bullish on the future for media stocks, however, as the downside facing pure-play cable networks without the online scale needed to take on Netflix and Amazon outweighs optimism over Trump's pro-business agenda.

"As viewership continues to bifurcate between live and on-demand and as skinnier bundles proliferate, we view the non-vertically integrated cable networks as riskier assets," MoffettNathanson analyst Michael Nathanson wrote in an early March report.