Wall Street’s Mid-Year Stock Picks for Challenging Times
Georg Szalai, of the THR, interviews some analysts. Here is what they say.
Investment in the entertainment industry has hit a rough patch. The Hollywood Reporter has conducted an in-depth analysis to identify the Hollywood companies that are weathering the storm and are potential profitable investments and worth consideration amidst the writer’s strike, layoffs, and the streamers crisis. “At the mid-year point of 2023, some agree on Warner Bros. Discovery as their best bet, while others back other entertainment conglomerates, Netflix or Endeavor,” writes Georg Szalai on the THR.
He interviewed a few analysts. Each one of them picked some companies. For Doug Creutz of TD Cowen, the choice is Warner Bros. Discovery: “We do view management’s (streaming) strategy as more prudent and sustainable than peers’, and we also have faith in management’s ability to hit its synergy targets,” says the expert, maintaining his “outperform” rating with a $19 stock price target. “We believe shares should trade at parity or even a premium relative to peers rather than the current discount.” Warner is also among Benchmark’s Matthew Harrigan favorites, saying he was encouraged by the conglomerate’s first-quarter earnings report and management commentary in his choice. The Benchmark analyst noted, “A major development was $50 million in positive earnings before interest, taxes, depreciation, and amortization for the direct-to-consumer business with expectations for 2023 U.S. profitability and confidence in $1 billion in 2025 global profits.”
Benjamin Swinburne of Morgan Stanley picks Endeavor: “Sports assets can compound both through asset value and free cash flow growth, and Endeavor’s sports exposure comes from its ownership of UFC, IMG, WME, OnLocation, live events (including two ATP 1000 tennis tournaments) and across its sports data & technology segment.”
Eric Handler of Roth MKM chooses WWE for similar sport-related factors. “While we believe the 2023 outlook could prove modestly conservative, the domestic TV rights negotiations offer a much more significant event for the fourth quarter of 2024 and beyond,” the analyst explained. Jeffrey Wlodarczak of Pivotal Research Group says Liberty Media – Formula One Group: “Appears to be clearly ‘winning’ at reinvigorating the sport, and Formula One appears to be hitting on all cylinders, which we do not believe is fully reflected in the current valuation.”
The choice of Bank of America’s Jessica Reif Ehrlich is Netflix and Warner Bros. Discovery. She sees Netflix’s crackdown on password sharing as an upside opportunity “inextricably linked” to the firm’s new ad tiers. She now projects 18.7 million subscriber net adds in 2023, up from 13.7 million previously, and around 20 million net adds in 2024, up from 16 million. About Warner Bros. Discovery, she says: “Despite the healthy share performance year-to-date, we remain very bullish on the long-term potential of WBD and view the current valuation as compelling.” Among the stock catalysts she identified are the combined Max streaming service and “incremental merger-related synergies.”
Steven Cahall of Wells Fargo picks Disney. “We see the portfolio working increasingly together between franchise IP, sports and entertainment, buoyed by Disney Parks, Experiences and Products,” he argued, noting the role CEO Bob Iger has played here beyond cost reductions, layoffs, and a streaming strategy refocus. “We do not think Bob Iger’s tenure will be defined by portfolio shaping, but rather an execution as Disney heads down this path.”
Fox Corp. is the unconventional pick of Robert Fishman of SVB Moffett Nathanson. “There has been a barrage of negative headlines related to Fox News over the past couple of months surrounding their $788 million Dominion legal settlement and subsequent, unexpected departure of Tucker Carlson,” Fishman acknowledged before emphasizing: “While we are not ignoring any of these impacts, we think despite these challenges the fundamentals and free cash flow story remain sound.”
Source: The Hollywood Reporter
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Georg Szalai, of the THR, interviews some analysts. Here is what they say.
Investment in the entertainment industry has hit a rough patch. The Hollywood Reporter has conducted an in-depth analysis to identify the Hollywood companies that are weathering the storm and are potential profitable investments and worth consideration amidst the writer’s strike, layoffs, and the streamers crisis. “At the mid-year point of 2023, some agree on Warner Bros. Discovery as their best bet, while others back other entertainment conglomerates, Netflix or Endeavor,” writes Georg Szalai on the THR.
He interviewed a few analysts. Each one of them picked some companies. For Doug Creutz of TD Cowen, the choice is Warner Bros. Discovery: “We do view management’s (streaming) strategy as more prudent and sustainable than peers’, and we also have faith in management’s ability to hit its synergy targets,” says the expert, maintaining his “outperform” rating with a $19 stock price target. “We believe shares should trade at parity or even a premium relative to peers rather than the current discount.” Warner is also among Benchmark’s Matthew Harrigan favorites, saying he was encouraged by the conglomerate’s first-quarter earnings report and management commentary in his choice. The Benchmark analyst noted, “A major development was $50 million in positive earnings before interest, taxes, depreciation, and amortization for the direct-to-consumer business with expectations for 2023 U.S. profitability and confidence in $1 billion in 2025 global profits.”
Benjamin Swinburne of Morgan Stanley picks Endeavor: “Sports assets can compound both through asset value and free cash flow growth, and Endeavor’s sports exposure comes from its ownership of UFC, IMG, WME, OnLocation, live events (including two ATP 1000 tennis tournaments) and across its sports data & technology segment.”
Eric Handler of Roth MKM chooses WWE for similar sport-related factors. “While we believe the 2023 outlook could prove modestly conservative, the domestic TV rights negotiations offer a much more significant event for the fourth quarter of 2024 and beyond,” the analyst explained. Jeffrey Wlodarczak of Pivotal Research Group says Liberty Media – Formula One Group: “Appears to be clearly ‘winning’ at reinvigorating the sport, and Formula One appears to be hitting on all cylinders, which we do not believe is fully reflected in the current valuation.”
The choice of Bank of America’s Jessica Reif Ehrlich is Netflix and Warner Bros. Discovery. She sees Netflix’s crackdown on password sharing as an upside opportunity “inextricably linked” to the firm’s new ad tiers. She now projects 18.7 million subscriber net adds in 2023, up from 13.7 million previously, and around 20 million net adds in 2024, up from 16 million. About Warner Bros. Discovery, she says: “Despite the healthy share performance year-to-date, we remain very bullish on the long-term potential of WBD and view the current valuation as compelling.” Among the stock catalysts she identified are the combined Max streaming service and “incremental merger-related synergies.”
Steven Cahall of Wells Fargo picks Disney. “We see the portfolio working increasingly together between franchise IP, sports and entertainment, buoyed by Disney Parks, Experiences and Products,” he argued, noting the role CEO Bob Iger has played here beyond cost reductions, layoffs, and a streaming strategy refocus. “We do not think Bob Iger’s tenure will be defined by portfolio shaping, but rather an execution as Disney heads down this path.”
Fox Corp. is the unconventional pick of Robert Fishman of SVB Moffett Nathanson. “There has been a barrage of negative headlines related to Fox News over the past couple of months surrounding their $788 million Dominion legal settlement and subsequent, unexpected departure of Tucker Carlson,” Fishman acknowledged before emphasizing: “While we are not ignoring any of these impacts, we think despite these challenges the fundamentals and free cash flow story remain sound.”
Source: The Hollywood Reporter
Share:
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