The entertainment industry’s accelerating growth is driven by increased consumer demand and significant technological enhancements. The proliferation of video platforms, streaming services, and burgeoning cloud gaming technologies have expanded access and facilitated new opportunities for content creators, ensuring sustained resilience within the entertainment sector.
Given this backdrop, fundamentally robust entertainment stocks Sony Group Corporation (SONY), JAKKS Pacific, Inc. (JAKK), and PLAYSTUDIOS, Inc. (MYPS) could be watched now. These stocks are rated B (Buy) in our proprietary POWR Ratings system.
The entertainment industry developed significantly and underwent rapid innovative changes last year, a trend that is predicted to persist in 2024. Increased adoption of video streaming applications on mobiles and televisions for on-demand movies, TV shows, and live event viewing amplifies the entertainment industry's demand.
Technological advancements combined with changing consumer behaviors are redefining the contours of the media and entertainment domain. Consequently, the media and entertainment market is estimated to reach $40.36 billion by 2029, growing at a CAGR of 7.8%.
The video gaming segment emerges as the most rapidly growing part of the entertainment industry. The advent of new gaming formats caters to the varied preferences of consumers who desire to experience the latest games without the prerequisite of purchasing a new PC or console.
The deployment of AR, VR, cloud gaming, and 5G technology has increased the demand for mobile games, contributing to further growth within the industry. As per Statista, revenue in the toys and games market in the U.S. is estimated to reach $40 billion in 2024 and is forecasted to grow at a 3.7% CAGR by 2028.
Considering these conducive trends, let's take a look at the fundamentals of the three Entertainment stocks.
Sony Group Corporation (SONY)
Headquartered in Tokyo, Japan, SONY designs, develops, produces, and sells electronic equipment, instruments, and devices for the consumer, professional, and industrial markets in Japan, the U.S., Europe, China, the Asia-Pacific, and internationally. It distributes and produces software, digital networks, gaming consoles, music, animation, movies, miniseries, and other television programs.
Recently, SONY expanded its global business strategy, turning its attention to Africa with a significant investment in the Cape Town-based video game studio Carry1st. This large-scale investment presents a crucial move by SONY to extend its reach across the African continent, earmarked as a potential future driver for PlayStation 5 sales.
With high expectations on the horizon, SONY anticipates that its PS5 sales will hit an all-time high in its fiscal year of 2023, projecting sales of 25 million PS5 units – a scale of success that no other PlayStation console has achieved in the history of the company.
SONY pays an annual dividend of $0.54 per share to its shareholders, which translates to a dividend yield of 0.62% on the current share price. Its four-year average yield is 0.57%. SONY’s dividend payments have grown at CAGRs of 6.1% and 15.7% over the past three and five years, respectively.
SONY’s trailing-12-month cash from operations of $9.42 billion is significantly higher than the industry average of $268.95 million, while its trailing-12-month cash per share of $5.63 is 130.7% higher than the industry average of $2.44.
For the fiscal third quarter that ended December 31, 2023, SONY’s total sales and financial services revenue and operating income increased 21.7% and 9.9% year-over-year to ¥3.75 trillion ($24.96 billion) and ¥463.34 billion ($3.09 billion), respectively.
For the same quarter, net income attributable to SONY’s stockholders and net income per share attributable to SONY’s stockholders increased 13.2% and 13.6% from the year-ago quarter to ¥363.92 billion ($2.42 billion) and ¥294.82, respectively. Moreover, its consolidated adjusted EBITDA stood at ¥605 billion ($4.03 billion), up 14.3% from the prior-year quarter.
Street expects SONY’s EPS for the fiscal fourth quarter ending March 2024 to increase 14% year-over-year to $0.87. Its revenue is expected to be $19.01 billion for the same quarter. The company surpassed consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 6.3% over the past six months to close the last trading session at $87.85. Over the past year, it has gained 3.3%.
SONY’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Momentum, Stability, and Sentiment. It is ranked #2 within the 11-stock Entertainment – Media Producers industry.
Click here for the additional POWR Ratings for SONY (Growth, Value, and Quality).
JAKKS Pacific, Inc. (JAKK)
JAKK designs, produces, markets, sells, and distributes toys and related products, kids indoor and outdoor furniture, and other consumer products worldwide. It operates through two segments: Toys/Consumer Products and Costumes.
On November 1, 2023, JAKK announced that it is entering a long-term agreement with Authentic Brands Group to design and distribute products inspired by iconic brands like Forever 21 and Sports Illustrated, aiming for a global retail debut in 2024.
The collaboration aligns with JAKK’s strategy to expand into new product categories, targeting Millennials and Gen Z while leveraging Authentic’s platform to diversify its seasonal offerings and explore additional collaborations.
JAKK’s trailing-12-month cash per share of $9.56 is 291.7% higher than the industry average of $2.44. Its trailing-12-month net income and levered FCF margins of 12.18% and 11.21% are 156% and 95.3% higher than the industry averages of 4.76% and 5.74%, respectively.
For the fiscal third quarter that ended September 30, 2023, JAKK’s net sales stood at $309.74 million, while gross profit increased 16.4% year-over-year to $106.99 million. Moreover, its adjusted EBITDA increased 12.9% from the prior-year quarter to $67.07 million.
For the same quarter, adjusted net income attributable to common stockholders and adjusted earnings per share stood at $50.09 million and $4.75, up 28.4% and 25% from the year-ago quarter, respectively.
Street expects JAKK’s revenue for the fiscal year ending December 2024 to increase 2.2% year-over-year to $728.65 million. Its EPS is expected to be $4.70 for the same year. The company surpassed consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has gained 73.7% over the past six months to close the last trading session at $33.58. Over the past year, it has gained 57.1%.
JAKK’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
JAKK has an A grade for Value, Sentiment, and Quality. Within the B-rated 18-stock Entertainment – Toys & Video Games industry, it is ranked #5.
Beyond what we’ve stated above, we have also rated the stock for Growth, Momentum, and Stability. Get all ratings of JAKK here.
PLAYSTUDIOS, Inc. (MYPS)
MYPS develops and publishes free-to-play casual games for mobile and social platforms in the U.S., North America, and internationally.
On November 14, 2023, MYPS extended its exclusive mobile licensing agreement with The Tetris Company for the iconic TETRIS game. The initial five-year extension, which includes an additional three-year option (for up to eight years total), comes at a time when user acquisition for new games is increasingly challenging due to market saturation, rising advertising costs, and shifting player preferences.
By keeping the globally recognized TETRIS brand within the MYPS portfolio, the company strategically positions itself for sustained organic growth and cost-efficient audience development within key mobile gaming categories, such as puzzle and strategy.
On November 1, 2023, the Board extended the share repurchase authorization through November 10, 2024, and increased the total amount authorized to $50 million, up from $30 million remaining under the previous authorization.
MYPS’ trailing-12-month asset turnover ratio of 0.92x is 88.4% higher than the industry average of 0.49x, while its trailing-12-month gross profit margin of 74.45% is 51.8% higher than the industry average of 49.03%.
For the fiscal third quarter that ended September 30, 2023, MYPS’ net revenue and AEBITDA increased 5.2% and 38.6% year-over-year to $75.86 million and $13.53 million, respectively.
For the same quarter, its net income and net income attributable to common stockholders per share stood at $3.80 million and $0.03, up 4.7% and 50% from the year-ago quarter, respectively.
Street expects MYPS’ revenue for the fiscal year ending December 2024 to increase 3.4% year-over-year to $319.65 million. Its EPS is expected to be $0.03 for the same year. The company surpassed consensus EPS estimates in each of the trailing four quarters and consensus revenue estimates in three of the trailing four quarters.
The stock has declined marginally over the past month to close the last trading session at $2.27.
MYPS’ POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
MYPS has an A grade for Value and a B for Sentiment. Within the Entertainment – Toys & Video Games industry, it is ranked #6.
To see additional POWR Ratings for Growth, Momentum, Stability, and Quality for MYPS, click here.
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SONY shares fell $0.03 (-0.03%) in premarket trading Wednesday. Year-to-date, SONY has declined -7.22%, versus a 4.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
3 B-Rated Entertainment Stocks to Watch StockNews.com
