Hollywood Stock Picks for 2012
Free advice! Amid an uncertain TV ad outlook and cratering movie attendance, THR polls Wall Street analysts for which stocks they believe are poised for big gains and losses.
Time Warner: "I worry about the economy and [television] ad rates," says Janney Montgomery Scott analyst Tony Wible. That's why he picks one of the least ad-exposed Hollywood congloms. "In traditional media, I like Time Warner as they have more rights to sell," he says, noting Warner Bros.' heavy 2012 output in film and TV. "I see HBO better positioned and the Turner networks poised for a rebound with new programming."
Imax: Thomas Weisel Partners analyst Ben Mogil and Eric Handler of MKM Partners both recommend the expanding giant-screen company despite expectations of no growth in overall movie attendance. "[There is] better film product in 2012, which has a better fit with Imax's core audience of moviegoers, namely fanboys," says Handler of such offerings as July's The Dark Knight Rises,
which will feature 40 minutes of Imax footage.
Coinstar: Wedbush Securities analyst Michael Pachter predicts that the owner of Redbox will "benefit immensely from the loss of DVD customers at Netflix."
Netflix: Pachter and Wible see it as one of the most challenged stocks in the entertainment space -- it recently fell to below $100 from more than $300 during the summer. "Netflix has a broken business model," Pachter says. "They had things balanced perfectly with their $10 hybrid offering and $8 streaming offering. Now they are at $16 for hybrid, are losing customers rapidly and are trying to make up the losses by expanding internationally."
DreamWorks Animation: The studio gets a rare "sell" rating from Mogil and BTIG's Richard Greenfield, who recently lowered his 2011 and 2012 estimates for the company. Greenfield, who consistently gripes about the company, points out that Shrek spinoff Puss in Boots lags far behind Shrek Forever After in terms of box-office revenue. Also, a recent Netflix content deal could "cannibalize catalog sales," says Wible.
Cablevision: The surprise departure of COO Tom Rutledge to run Charter in December has left a leadership vacuum at the cable operator. In an acerbic note, Greenfield wrote that if CEO Jim Dolan took on a larger role, "we would not be comforted."
HOW THE STUDIO CONGLOMS FARED IN 2011: The S&P 500 was unchanged, but most entertainment biggies performed much better.
UP: 44.5 percent
Closing price on Dec. 30: $27.14
Market cap: $17.76 billion
Homeland on Showtime is a breakout hit and Two and a Half Men on CBS is stronger post-Charlie Sheen, helping the company grow operating income by 41 percent.
UP: 16.3 percent
Closing price on Dec.: 30 $45.41
Market cap: $25.08 billion
Captain America, Rango, Thor and Transformers: Dark of the Moon helped its filmed entertainment unit post a 15 percent rise in revenue, besting the 10 percent growth notched by its media networks division.
UP: 15.5 percent
Closing price on Dec. 30: $36.14
Market cap $36.17 billion
A slight drop in operating income at its networks unit was offset by growth in publishing and movies, thanks in large part to the final Harry Potter film.
UP: 11.8 percent
Closing price on Dec. 30: $18.18
Market cap $45.83 billion
The phone-hacking scandal dented the company's reputation but not operating income, which grew in five of its six business segments in the most recent quarter. The exception: publishing.
UP: 10 percent
Closing price on Dec. 30: $23.71
Market cap $64.61 billion
Revenue at the NBCUniversal theme parks (up 33 percent) and cable networks (up 13 percent) made up for sluggishness at broadcast TV and the film studio.
Walt Disney Co.
Closing price on Dec. 30: $37.5
Market cap $67.37 billion
Posted record revenue and net income in fiscal 2011 and boosted its dividend by 50 percent, but some analysts complain the company is overly dependent on ESPN for its growth.
DOWN: 49.5 percent
Closing price on Dec. 30: $18.04
Market cap $18.1 billion
The earthquake and tsunami hurt the Japan-based company, which already lost $8.8 billion by sellingTV sets the past eight years and expects to keep losing on that product into 2013.