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3 Media Stocks Worth Buying From a Prospering Industry
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The Zacks Media Conglomerates industry is flourishing, driven by the consumer shift toward over-the-top (OTT) content. Major players like Madison Square Garden Entertainment (MSGE - Free Report) , Sinclair (SBGI - Free Report) and Reservoir Media (RSVR - Free Report) are aggressively investing in developing original music, shows and fresh content to captivate and retain Gen Z and millennial subscribers. Moreover, the industry's prospects are bolstered by the availability of cost-effective alternative packages, such as skinny bundles, designed to entice consumers with lower prices compared to traditional offerings. Conversely, the industry is grappling with waning broadcast television ratings and diminishing demand for home entertainment sales of theatrical content. Furthermore, advertisers' tepid spending amid rampant inflation and elevated interest rates poses a formidable concern for industry players.
Industry Description
The Zacks Media Conglomerates industry encompasses companies engaged in creating and distributing various content forms, from entertainment to educational materials. These firms also offer travel and consumer products. The industry is adapting to the shift towards OTT content, both subscription-based and ad-supported. Advertising remains a key revenue source, while the metaverse presents new opportunities. Subscription price increases, driven by growing subscriber numbers, offer potential revenue growth. However, the industry faces challenges which include declining broadcast TV ratings, reduced demand for home entertainment versions of theatrical releases, and increasing cord-cutting trends. Despite these obstacles, media conglomerates continue to evolve, leveraging new technologies and consumer preferences to maintain their market position.
3 Trends Shaping the Future of the Media Industry
Original Content Driving Growth: Media companies' capacity to generate advertising revenues beyond traditional TV platforms, such as websites and other digitally consumed channels, unlocks increased opportunities for targeted advertising. The growing consumer preference for subscription services over linear pay-TV and rental or outright purchases has compelled industry players to adapt their business models. Media companies are innovating with original content to attract and retain subscribers.
High-Speed Internet Demand Acting as a Key Catalyst: The burgeoning demand for high-speed Internet, including broadband, has benefited media industry participants. Improving Internet speed has fueled the demand for high-quality videos and the trend of binge-watching. Furthermore, a strengthening broadband ecosystem in international markets, coupled with the proliferation of smart TVs, is expected to drive growth.
Cord-Cutting and Matured PayTV Industry Hurting Prospects: The media television industry is undergoing a rapid evolution of distribution platforms, embracing new players and advanced technologies. The declining profitability of residential video services due to rising programming costs and retransmission fees has made survival challenging for traditional companies. Additionally, the heightened demand for on-demand content has led to the mushrooming of streaming service providers, making it increasingly difficult for traditional media television companies to maintain their viewer base.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Media Conglomerates industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #43, which places it in the top 17% 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 continued outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential.
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 Outperforms the Sector, Lags the S&P 500
The Zacks Media Conglomerates industry has outperformed the broader Zacks Consumer Discretionary sector but lagged the S&P 500 composite over the past year.
The industry has returned 7.4% in the abovementioned period compared with the broader sector’s growth of 6.6%. The S&P 500 has risen 24.9% during the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month P/S, a commonly used multiple for valuing media companies, we see that the industry is currently trading at 0.92X compared with the S&P 500’s 5.57X and the sector’s 1.94X.
Over the past two years, the industry has traded as high as 1.35X and as low as 0.79X, with a median of 1.01X, as the charts below show.
Trailing 12-Month Price-to-Sales (P/S) Ratio
3 Media Stocks to Buy
Madison Square Garden Entertainment: This Zacks Rank #1 (Strong Buy) company provides live entertainment. The company's portfolio includes New York's Madison Square Garden, The Theater at Madison Square Garden, Radio City Music Hall, and Beacon Theatre and The Chicago Theatre, which showcase a broad range of sporting events, concerts, family shows and special events. In addition, the company features the original production, the Christmas Spectacular Starring the Radio City Rockettes, which has been a holiday tradition for 90 years. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company is benefiting from an increase in the number of concerts and other live entertainment and sporting events held at the company's venues. The top-line growth is gaining from the entertainment and sports booking business, which showcases a broad range of compelling concerts, family shows and special events, as well as a diverse mix of sporting events, for millions of guests annually. Its commitment to creating its MSG Sphere technology makes it a technological leader in the live performance sector.
The Zacks Consensus Estimate for the company’s fiscal 2025 earnings has moved north by 18% to $1.64 per share over the past 30 days. MSGE shares have risen 32.8% year to date.
Price and Consensus: MSGE
Sinclair: This Zacks Rank #1 company provides content through local TV stations and digital platforms. It distributes programming from third-party networks, syndicators, local news, original programming and college sports. The company also manages digital media products related to its TV station assets and oversees technical and software services companies. Additionally, Sinclair owns the intellectual property for broadcast technology advancement and engages in diverse businesses like real estate, venture capital, private equity and direct investments.
The company is benefiting from the growing adoption of its “Broadspan” datacasting platform, which has enabled data distribution capability across all current Sinclair NextGen Broadcast (ATSC 3.0) markets, where it serves as the host station. Edgio, Inc., a leading content delivery network, is the first commercial partner of the Broadspan datacasting platform.
The company has also taken its first steps into the usage of generative artificial intelligence within its original content to reach more audiences globally in their native languages. For this initiative, Sinclair has collaborated with HeyGen, a leading generative AI video company specializing in voice translation and lip-sync services, transforming the way businesses use video to enable global storytelling.
The Zacks Consensus Estimate for the company’s 2024 earnings has increased by 21.9% to $4.57 per share over the past 30 days. SBGI shares have declined 6.8% year to date.
Price and Consensus: SBGI
Reservoir Media: This Zacks Rank #2 (Buy) company benefits from its strong content portfolio. Its publishing catalog includes historic compositions written and performed by greats like Joni Mitchell, The Isley Brothers, Billy Strayhorn, Hoagy Carmichael and John Denver. The company has also signed publishing deals with acclaimed singer-songwriter Wrabel, Platinum-selling songwriter-producer Aaron Zuckerman and global hitmaking songwriter-producer Lewis Thompson.
The company has announced plans to raise up to $100 million through an offering of various securities. The move signals Reservoir’s ambition to fuel further growth through acquisitions while reducing its debt. In addition to acquisitions, Reservoir also plans to use a portion of the proceeds to reduce its debt burden, potentially improving its financial flexibility and creditworthiness.
The Zacks Consensus Estimate for the company’s fiscal 2025 earnings has remained steady at 9 cents per share over the past 30 days. RSVR shares have risen 8.8% year to date.
Price and Consensus: RSVR
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3 Media Stocks Worth Buying From a Prospering Industry
The Zacks Media Conglomerates industry is flourishing, driven by the consumer shift toward over-the-top (OTT) content. Major players like Madison Square Garden Entertainment (MSGE - Free Report) , Sinclair (SBGI - Free Report) and Reservoir Media (RSVR - Free Report) are aggressively investing in developing original music, shows and fresh content to captivate and retain Gen Z and millennial subscribers. Moreover, the industry's prospects are bolstered by the availability of cost-effective alternative packages, such as skinny bundles, designed to entice consumers with lower prices compared to traditional offerings. Conversely, the industry is grappling with waning broadcast television ratings and diminishing demand for home entertainment sales of theatrical content. Furthermore, advertisers' tepid spending amid rampant inflation and elevated interest rates poses a formidable concern for industry players.
Industry Description
The Zacks Media Conglomerates industry encompasses companies engaged in creating and distributing various content forms, from entertainment to educational materials. These firms also offer travel and consumer products. The industry is adapting to the shift towards OTT content, both subscription-based and ad-supported. Advertising remains a key revenue source, while the metaverse presents new opportunities. Subscription price increases, driven by growing subscriber numbers, offer potential revenue growth. However, the industry faces challenges which include declining broadcast TV ratings, reduced demand for home entertainment versions of theatrical releases, and increasing cord-cutting trends. Despite these obstacles, media conglomerates continue to evolve, leveraging new technologies and consumer preferences to maintain their market position.
3 Trends Shaping the Future of the Media Industry
Original Content Driving Growth: Media companies' capacity to generate advertising revenues beyond traditional TV platforms, such as websites and other digitally consumed channels, unlocks increased opportunities for targeted advertising. The growing consumer preference for subscription services over linear pay-TV and rental or outright purchases has compelled industry players to adapt their business models. Media companies are innovating with original content to attract and retain subscribers.
High-Speed Internet Demand Acting as a Key Catalyst: The burgeoning demand for high-speed Internet, including broadband, has benefited media industry participants. Improving Internet speed has fueled the demand for high-quality videos and the trend of binge-watching. Furthermore, a strengthening broadband ecosystem in international markets, coupled with the proliferation of smart TVs, is expected to drive growth.
Cord-Cutting and Matured PayTV Industry Hurting Prospects: The media television industry is undergoing a rapid evolution of distribution platforms, embracing new players and advanced technologies. The declining profitability of residential video services due to rising programming costs and retransmission fees has made survival challenging for traditional companies. Additionally, the heightened demand for on-demand content has led to the mushrooming of streaming service providers, making it increasingly difficult for traditional media television companies to maintain their viewer base.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Media Conglomerates industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #43, which places it in the top 17% 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 continued outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential.
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 Outperforms the Sector, Lags the S&P 500
The Zacks Media Conglomerates industry has outperformed the broader Zacks Consumer Discretionary sector but lagged the S&P 500 composite over the past year.
The industry has returned 7.4% in the abovementioned period compared with the broader sector’s growth of 6.6%. The S&P 500 has risen 24.9% during the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month P/S, a commonly used multiple for valuing media companies, we see that the industry is currently trading at 0.92X compared with the S&P 500’s 5.57X and the sector’s 1.94X.
Over the past two years, the industry has traded as high as 1.35X and as low as 0.79X, with a median of 1.01X, as the charts below show.
Trailing 12-Month Price-to-Sales (P/S) Ratio
3 Media Stocks to Buy
Madison Square Garden Entertainment: This Zacks Rank #1 (Strong Buy) company provides live entertainment. The company's portfolio includes New York's Madison Square Garden, The Theater at Madison Square Garden, Radio City Music Hall, and Beacon Theatre and The Chicago Theatre, which showcase a broad range of sporting events, concerts, family shows and special events. In addition, the company features the original production, the Christmas Spectacular Starring the Radio City Rockettes, which has been a holiday tradition for 90 years. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company is benefiting from an increase in the number of concerts and other live entertainment and sporting events held at the company's venues. The top-line growth is gaining from the entertainment and sports booking business, which showcases a broad range of compelling concerts, family shows and special events, as well as a diverse mix of sporting events, for millions of guests annually. Its commitment to creating its MSG Sphere technology makes it a technological leader in the live performance sector.
The Zacks Consensus Estimate for the company’s fiscal 2025 earnings has moved north by 18% to $1.64 per share over the past 30 days. MSGE shares have risen 32.8% year to date.
Price and Consensus: MSGE
Sinclair: This Zacks Rank #1 company provides content through local TV stations and digital platforms. It distributes programming from third-party networks, syndicators, local news, original programming and college sports. The company also manages digital media products related to its TV station assets and oversees technical and software services companies. Additionally, Sinclair owns the intellectual property for broadcast technology advancement and engages in diverse businesses like real estate, venture capital, private equity and direct investments.
The company is benefiting from the growing adoption of its “Broadspan” datacasting platform, which has enabled data distribution capability across all current Sinclair NextGen Broadcast (ATSC 3.0) markets, where it serves as the host station. Edgio, Inc., a leading content delivery network, is the first commercial partner of the Broadspan datacasting platform.
The company has also taken its first steps into the usage of generative artificial intelligence within its original content to reach more audiences globally in their native languages. For this initiative, Sinclair has collaborated with HeyGen, a leading generative AI video company specializing in voice translation and lip-sync services, transforming the way businesses use video to enable global storytelling.
The Zacks Consensus Estimate for the company’s 2024 earnings has increased by 21.9% to $4.57 per share over the past 30 days. SBGI shares have declined 6.8% year to date.
Price and Consensus: SBGI
Reservoir Media: This Zacks Rank #2 (Buy) company benefits from its strong content portfolio. Its publishing catalog includes historic compositions written and performed by greats like Joni Mitchell, The Isley Brothers, Billy Strayhorn, Hoagy Carmichael and John Denver. The company has also signed publishing deals with acclaimed singer-songwriter Wrabel, Platinum-selling songwriter-producer Aaron Zuckerman and global hitmaking songwriter-producer Lewis Thompson.
The company has announced plans to raise up to $100 million through an offering of various securities. The move signals Reservoir’s ambition to fuel further growth through acquisitions while reducing its debt. In addition to acquisitions, Reservoir also plans to use a portion of the proceeds to reduce its debt burden, potentially improving its financial flexibility and creditworthiness.
The Zacks Consensus Estimate for the company’s fiscal 2025 earnings has remained steady at 9 cents per share over the past 30 days. RSVR shares have risen 8.8% year to date.
Price and Consensus: RSVR