Zacks Industry Outlook Highlights: ViacomCBS, News Corp. and Lionsgate
Zacks Industry Outlook Highlights: ViacomCBS, News Corp. and Lionsgate
For Immediate Release
The Zacks Film and Television Production and Distribution industry is benefiting from a spike in demand for digital entertainment fueled by capacity and operational limitations in movie theaters, theme parks and cruise lines and continued restrictions on travel. Increased consumption of media, music and news over the web due to the pandemic-induced lockdowns and shelter-at-home guidelines has been a key catalyst for industry participants like ViacomCBS, News Corp. and Lionsgate. Steady recovery in the advertising spending environment and resumption of production pipelines bode well for film and television production companies.
The Zacks Film and Television Production and Distribution industry comprises companies involved in film and TV production, distribution and exhibition. The main activities of the industry participants include the production and distribution of entertainment content to theaters, TV networks, video-on-demand platforms, streaming services and other exhibitors. Imax offers entertainment technology, and specializes in motion picture technologies and presentations.
Industry participants produces and distributes motion pictures for theatrical and straight-to-video release besides TV programming. These players are heavily dependent on the box-office performance of their films, both domestically and internationally, the number of film releases and ratings of TV shows.
3 Film and Television Production Industry Trends to Watch Out For
Over-the-Top Services Gaining Prominence: Companies involved in content creation are looking to distribute content through over-the-top services to leverage the popularity of their franchises. With this, they are looking to provide exclusive content and a differentiated experience.
However, streaming companies are increasingly producing original and award-winning feed to reduce licensing costs and excessive dependence on third-party content providers. This is likely to hurt industry participants’ content distribution strategy.
Binge-Watching Driving Consumption: Factors such as binge watching, deepening Internet penetration and advancement in mobile, video, and wireless technologies have got viewers glued to small screens. In order to keep pace with new consumption patterns, industry participants are turning to digital content distribution.
The emergence of digital capabilities is making consumer data easily available to companies. With the use of AI tools, production houses are gaining a better understanding of user preference. This is helping them produce content that strikes a chord with viewers. However, increasing spending on content and sales & marketing is hurting profitability due to stiff competition from streaming players.
Technological Advancement Aids Prospects: Exhibitors are turning to highly efficient and cost-effective technologies like laser-based projection systems to enhance image quality and the entire movie experience. Additionally, the use of technologies like motion seating, immersive audio systems and interactive movies among others is expected to enhance the viewing experience.
The increasing adoption of AR and VR technologies bodes well for industry participants. However, the evolution of alternative motion picture distribution channels such as home video, pay-per-view, streaming services, video-on-demand, Internet and syndicated and broadcast television is hurting exhibitors.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Film and Television Production and Distribution industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #104, which places it in the top 41% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags S&P 500, Beats Sector
The Zacks Film and Television Production and Distribution industry has underperformed the Zacks S&P 500 composite but beat its own sector in the past year.
The stocks in this industry have collectively gained 3.9% compared with the S&P 500’s rally of 32.4% and the Zacks Consumer Discretionary sector’s rise of 1.7% over the same time frame.
Industry's Current Valuation
On the basis of the trailing 12-month price-to-sales (P/S), a commonly used multiple for valuing Film and Television Production and Distribution stocks, the industry is currently trading at 1.31X compared with the S&P 500’s 4.72X and the sector’s 2.35X.
Over the past five years, the industry has traded as high as 2.11X and as low as 0.55X, recording a median of 1.51X.
3 Film & Television Stocks to Watch Right Now
News Corporation: The company is benefiting from prudent strategic efforts, which include the ongoing digital transformation of the business, and investments in the Digital Real Estate Services, Dow Jones and Book Publishing segments.
Recovery in the print and digital advertising market from last year’s adverse impacts of the COVID-19 pandemic is driving results. News Corporation has been witnessing a rapid expansion at Move. It has been diversifying revenue streams through strategic acquisitions and operational enhancement.
News Corporation is well positioned to grab opportunities generated from technology sharing across geographies and businesses, and bundled offerings of enriched content to consumers and advertising partners.
News Corporation’s shares have gained 23.1% year to date. The Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company’s fiscal 2021 earnings has increased 14% to 65 cents per share over the past 30 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ViacomCBS: Shares of this Zacks Rank #3 (Hold) company have declined 9.7% year to date. Competition in the streaming space from the likes of Netflix and Disney+ is an overhang. Also, a leveraged balance sheet is a concern.
However, ViacomCBS’ solid cable network portfolio is a major growth driver. Growing traction of Showtime, BET, Comedy Central and Nickelodeon is driving top-line growth. Higher Affiliate, domestic-streaming and digital-video revenues are major positives. Also, the addition of Pluto TV to ViacomCBS’ portfolio of streaming services is a key catalyst. Paramount+, which features a massive content catalog of episodes, movie titles and live sporting events has gained significant traction within a short span of time.
The Zacks Consensus Estimate for ViacomCBS’ fiscal 2021 earnings has declined 2.8% to $3.77 per share over the past 30 days.
Lionsgate: The company is expected to benefit from a spurt in viewership of Starz’s content across all platforms, as well as from an increase in the subscriber base of its OTT platforms on higher media consumption amid the coronavirus outbreak.
The launch of consumer OTT app Lionsgate Play in India is a positive for Lionsgate. The resumption of film and television production is also expected to drive growth.
The Zacks Consensus Estimate for this Zacks Rank #3 company’s 2021 earnings has been steady at 84 cents per share over the past 30 days. Lionsgate’s shares have returned 43.8% year to date.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
News Corporation (NWSA): Free Stock Analysis Report
Lions Gate Entertainment Corp. (LGF.A): Free Stock Analysis Report
ViacomCBS Inc. (VIAC): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research