May gloom for most showbiz stock prices

Industry as a whole underperforms broader markets

With some very impressive exceptions, show-business stocks undperformed broader markets during May: The S&P 500 rose 5.3%, the Dow 4.1% and the Nasdaq 3.3%, but the lowly THR Showbiz 50 actually sank.

The results reversed some of April's powerful rally that had Showbiz 50 stocks rising nearly 14% and outpacing the rest of the market.

Nevertheless, big gains were to be had for nimble media investors, especially for those who bought stock in Carmike Cinemas, which leapt 126% to $9.20 in May, making it the Showbiz 50's biggest gainer.

Carmike reported in early May that its first-quarter revenue grew almost 5% and its per-screen average attendance was up nearly 7%, and investors have been bidding the stock higher ever since.

It might seem a no-brainer: The boxoffice is on fire; invest in movie exhibition.

Not so fast, though, because shares of Carmike competitor Regal Entertainment lost more than 2% in May to $12.76. Also, National CineMedia, an in-theater advertiser that is benefiting from packed movie houses, saw its stock sink nearly 14% in May to $12.51.

National CineMedia's sin was to issue second-quarter guidance in mid-May that was below the expectations of analysts, and the company doesn't expect much more revenue in 2009 than it had in 2008, despite a booming boxoffice this year.

The Showbiz 50's second-biggest gainer was THQ, which said recently that it is building a fitness video game for the Wii platform based on NBC's hit TV show "The Biggest Loser."

While interesting, that announcement didn't move the stock, but reporting earlier in May quarterly financial results that were not as bad as expected did cause the stock to jump 88% to $6.43 during the course of the month.

Rounding out the Showbiz 50's five biggest gainers were Sinclair Broadcasting, up 59%; Live Nation, up 46%; and Avid Technology, which rose 29%.

News Corp. fared best among the conglomerates, rising 23% to $11.23 in May, followed by Viacom (up 15% to $22.17), Disney (up 11% to $24.22), Time Warner (up 8% to $23.42), CBS (up 5% to $7.38) and Sony (up 1% to $26.23).

Among the notable research reports from Wall Street analysts in May was one from Laura Martin of Soleil that suggested "up to $300 billion of market cap across the entire television value chain is at risk" because of TV content's rapid move to the Web.

She acknowledges that the figure is her worst-case scenario and said, in fact, that most conglomerates are undervalued right now. Of the 11 companies she covers, she calls eight of them a "buy," including CBS, News Corp., Time Warner, Time Warner Cable and even Warner Music Group, which rose 28% in May and narrowly missed cracking the Showbiz 50's Top 5.

Cablevision Systems earned a price-target hike in May from Kaufman Bros. analyst Todd Mitchell, who went from $16 a share to $21. The stock rose 11% in May to $19.03.

The analyst added, though, that "given the company's already premium valuation to its peer group, and our concerns over competitive positioning, we maintain our 'hold' rating on shares."

Avid received an upgrade to "overweight" from JPMorgan analyst Paul Coster, who said the switch to HD programming is benefiting the company. He boosted his target from $11 to $17, and the stock closed May at $14.24.

Scripps Networks Interactive also got an upgrade, this one to "neutral" from UBS analyst Michael Morris, who upped his target from $20 to $30. The stock was up 1% in May to $27.74.

Morris noted that the stock has appreciated 50% since early March "on encouraging signs that advertising spending has stabilized." Among the company's assets are the TV networks HGTV, Food Network, DIY Network, Fine Living Network and Great American Country.

"Scripps Networks Interactive generates 63% of revenue from ads and an improved environment mitigates downside concerns," the analyst said.