Forget Disney, Buy These 2 Entertainment Stocks Instead
Even though the entertainment industry is expected to grow significantly in the coming months, the streaming services space has become overcrowded. So, not all industry participants are well-positioned to gain...
Even though the entertainment industry is expected to grow significantly in the coming months, the streaming services space has become overcrowded. So, not all industry participants are well-positioned to gain in the near term. For instance, we think the stock of famous entertainment company Walt Disney (DIS) looks overvalued at its current price level. Therefore, it could be wise to bet on quality entertainment stocks News Corporation (NWSA) and World Wrestling Entertainment (WWE) instead to capitalize on the industry’s growth. Read on.
One of the world’s premier entertainment companies, The Walt Disney Company (DIS), in Burbank, Calif., has completed several developments over the past few months, especially with the help of its streaming service Disney +. However, its shares plunged in price after it posted fourth-quarter earnings that missed Wall Street’s expectations and revealed a significant slowdown for its Disney + service.
Also, on November 16, Louis Alfieri, the chief creative officer of Raven Sun Creative, said that he’s seeking unspecified damages from Walt Disney Parks and Resorts for allegedly infringing on his patent for a “tower ride.” DIS stock has lost 16.5% in price over the past month to close the last trading session at $142.15. Also, in terms of forward EV/S, its 3.82x is 54% higher than the 2.48x industry average. And its 3.09x forward P/S is 86.5% higher than the 1.66x industry average. So, we think it could be wise to wait for a better entry point in the stock.
Nevertheless, the entertainment industry is expected to grow significantly in the coming months, thanks to the increased demand for digital services. Furthermore, as the economy gradually recovers, live entertainment is expected to pick up. According to a PwC report, the $2 trillion-plus global entertainment and media industry is likely to grow 6.7% in 2022. So, we think it could be wise to bet on quality entertainment stocks News Corporation (NWSA) and World Wrestling Entertainment, Inc. (WWE) instead.
News Corporation (NWSA)
NWSA is a New York City-based media and information services company that focuses on creating and distributing content for consumers and businesses worldwide. It operates through six segments: Digital Real Estate Services; Subscription Video Services; Dow Jones; Book Publishing; News Media; and Other.
On September 16, Piers Morgan announced his intent to join NWSA and FOX News Media in a global deal, launching a new TV show in early 2022. Piers Morgan said, “I’m thrilled to be returning to News Corp. which is where I began my media career more than 30 years ago.”
NWSA’s total revenues increased 18.2% year-over-year to $2.50 billion its fiscal first quarter, ended September 30, 2021. Its Dow Jones revenue increased 15% year-over-year to $444 million. Also, its total segment EBITDA came in at $410 million, up 53% year-over-year.
For its fiscal year 2022, NWSA’s revenue and EPS are expected to grow 8.7% and 28.4%, respectively, year-over-year to $10.17 billion and $0.86. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 17.4% in price year-to-date.
NWSA’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Sentiment and a B grade for Momentum. NWSA is ranked #1 of 18 stocks in the Entertainment - Media Producers industry. Click here to see the additional POWR Ratings for NWSA (Growth, Value, Stability, and Quality).
World Wrestling Entertainment, Inc. (WWE)
Integrated media and entertainment company WWE engages in the sports entertainment business worldwide. The Stamford, Conn.-based company operates through three segments: Media; Live Events, and Consumer Products.
On November 22, Special Olympics and WWE announced a multi-year extension of their global partnership to help create inclusion through sports. Special Olympics CEO Mary Davis said, “WWE has been an incredible global partner to our movement over the past five years, and we are so excited to announce that we will continue our collective impact for years to come both domestically and around the world.”
For its fiscal third quarter ended September 30, 2021, WWE’s total revenue increased 15.4% year-over-year to $255.80 million. Its media revenue came in at $202.70 million, versus $201 million in the previous period. Furthermore, its total operating income was $64 million compared to $63.40 million in the year-ago period.
WWE’s revenue is expected to be $1.26 billion in fiscal 2022, representing a 13.6% year-over-year rise. In addition, the company’s EPS is expected to increase 23.1% year-over-year to $1.92 in the current year. Also, it surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 6.43% in price.
It is no surprise that WWE has a B grade for Growth, Momentum, and Quality in our POWR Rating system. WWE is ranked #2 in the Entertainment - Media Producers industry. Click here to see the additional POWR Ratings for WWE (Value, Stability, and Sentiment).
NWSA shares rose $0.25 (+1.19%) in premarket trading Thursday. Year-to-date, NWSA has gained 18.35%, versus a 22.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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