Entertainment companies' stocks soar

Showbiz 50 gains 3% on Friday trading

If Wall Street is still fretting over a weak U.S. economy and high gas prices that have supposedly been depressing advertising, theme parks and even moviegoing, it didn't show Friday: Stocks soared, and entertainment companies led the way.

The Dow was up 2.7% Friday, the Nasdaq up 2.5% and the S&P 500 up 2.4%. But The Hollywood Reporter Showbiz 50 outperformed all, climbing 3% on its way to logging one of its biggest gains this year.

The second-biggest gainer, behind a 29% surge for Live Nation, was Time Warner. The 7.6% jolt was unusual for Time Warner, and it's No. 2 position on the Showbiz 50 was equally strange, given the stock's steady 30% decline during the past 18 months.

While Live Nation's gain can be attributed to a stellar quarterly earnings report the night prior -- it made a $1.2 million profit while analysts predicted a big loss -- Time Warner's bullishness was harder to explain.

It could just be that its earnings report of a few days earlier didn't scare investors who are just now realizing that the stock is undervalued, despite the negativity surrounding the AOL and print publishing units.

Stanford Group analyst Frederick Moran said the company's shares trade at an earnings-per-share 2009 multiple of just 13, while most of its peer group is at 15. He expects TW to trade at a 17 multiple, thus his $20 target on its shares.

Elsewhere among the conglomerates, CBS climbed 4.4% on Friday, Viacom was up 3.8%, Disney up 3.6%, News Corp. up 2.2% and Sony climbed 2.1%.

After Friday's big moves, Disney remained the biggest media conglomerate based on market cap at $60.1 billion, followed by Time Warner ($55.9 billion), Sony ($39.4 billion), News Corp. ($36.6 billion), Viacom ($18.4 billion) and CBS ($11.4 billion).

Toward the end of last year, News Corp. was the largest media conglomerate in the world with a market cap of $67.8 billion, though its stock has tumbled from more than $22 a share back then to just $14.38 on Friday.

Of the 50 stocks that make up THR's Showbiz 50 index, only eight of them fell Friday. Leading to the downside were Activision Blizzard, down 4.3%, Sirius XM Radio (2.9%), Imax (1.9%), Blockbuster (1.8%) and Yahoo (1.4%).

Unfortunately for media investors, though, the index's outperformance Friday has been a rarity of late, thus it lags the broader markets. So far this year, the Showbiz 50 is off 15.3% while the S&P 500 is down only 11.7%.