European Entertainment Stocks Up at Midyear Mark

Hollywood Sign - H 2015
AP Images/Invision

Hollywood Sign - H 2015

Led by the likes of Germany's ProSieben, Italy's Mediaset and Britain's ITV, many companies have outperformed the broader European market.

The stocks of big European entertainment companies, from British TV giant ITV and France's Vivendi to Germany's ProSiebenSat.1 and Italy's Mediaset, on Tuesday wrapped up the first half of 2015 with gains of varying sizes.?

Overall, ProSieben, Mediaset and ITV were among the biggest gainers in the first six months of the year as many sector stocks outperformed the 11.3 percent gain in the broad-based Stoxx Europe 600 index.

Over the past couple of days, European markets have been rattled by Greece's debt crisis, hanging a cloud over economies on the continent and the outlook for media and entertainment companies. "These are hard times," Sanford C. Bernstein analyst Claudio Aspesi tells THR.

Here is a look at the performance of the stocks of key European entertainment sector players at the end of the first half of 2015.

The German TV powerhouse ended the first half of 2015 at €44.30, compared with its 2014 close of €34.83, up 27.2 percent for the year so far.

Whittaker recently highlighted the stock's valuation lead over pan-European broadcaster RTL. "Part of this gap is because ProSieben is perceived as a purer German TV advertising play," he said, but also "because ProSieben has successfully presented itself as an increasing diversification play."

The Italian media conglomerate founded by Silvio Berlusconi has seen its ups and downs.

On Tuesday, its stock closed at €4.31, compared with €3.44 at the end of 2014. That left it up 25.3 percent for the first six months of 2015.

Amid the Greek debt crisis, some have said Italian, Spanish and other Southern European stocks could be hurt amid contagion fears. Mediaset is among those at risk, says Aspesi. "It is worse to be dependent on advertising than subscriptions revenues, and it is better to be in more solid countries than in the peripherals, so ITV is faring better than Mediaset," he tells THR.?

The British TV networks and production giant continues a strong run for its shares. On Tuesday, its stock closed at 263.30 pence, up 22.4 percent for the year to date from 215.20 pence.

Analysts continue to like the stock and the company's continued acquisition of content production firms.

"Valuation remains attractive relative to history and, in our view, does not reflect some upside opportunities (regulatory changes, perhaps M&A)," said Aspesi in a recent note to investors. "As a result, we raise our target price to £3.25."

The pan-European pay TV giant, in which Rupert Murdoch's 21st Century Fox holds a 39 percent stake, ended the first half of the year at 1,037 pence after closing 2014 at 899 pence, an increase of 15.4 percent.

Liberum Capital analyst Ian Whittaker recently reiterated his "sell" rating on the stock in a note focusing on Sky's online video service NowTV. "The longer-term key question is whether NowTV is cannibalistic or supplementary to Sky's traditional subscriber base," he wrote. "Our current forecasts assume it is more supplementary than cannibalistic for now, but there is an obvious risk here — for example, why would someone who subscribes to Sky for sports now not just take the £31.99 monthly package just launched on NowTV without having a 12-month contract and pay for other content."

He also said that Sky's recent subscriber disclosure changes would "make it harder to see if this is actually happening."

The French media and telecom conglomerate recently became the largest shareholder in Telecom Italia with a voting stake of 14.9 percent.

"We think the situation is a bigger gamble than most investors realize," Aspesi said in a less than lukewarm review. "A value creation opportunity in Telecom Italia seems largely in the hands of others and early signs suggest the Italian government are opposed to changes at Telecom Italia. We remain unimpressed."

Vivendi's stock on Tuesday closed at €22.63, up 9.4 percent from its 2014 close of €20.69.

RTL Group?
The stock of the pan-European broadcaster closed Tuesday at €81.11, compared with €79.12 at the end of December. That left it 2.5 percent above its 2014 closing price, making it an underperformer compared to peers.

Whittaker earlier this month reiterated his "buy" rating and €120 target price on the stock, lauding a presentation by the CEO of online video service BBTV, which it recently acquired.

"For us, one of the key points that came out of the presentation was RTL's desire to widen its revenue streams, which Axel Springer has done successfully," he said. "Potential digital uplift from new services, such as BBTV and SpotXchange, are probably not fully reflected in analysts' forecasts."

Twitter: @georgszalai