The entertainment industry is experiencing a transformational phase, significantly from ongoing trends of social media platforms, video gaming and interactive toys, online gambling, and high-quality streaming services.
Given the industry’s tailwinds, fundamentally sound entertainment stocks Cedar Fair, L.P. (FUN), Golden Entertainment, Inc. (GDEN), and Gravity Co., Ltd. (GRVY) could be ideal investments in December for potential gains.
Social media, gaming, and streaming video enable new business models and reshape the entertainment sector. Given the ongoing trend of online gaming globally, the emergence of fast network connectivity like 5G, and solid demand for 3D games, the video game industry’s outlook seems promising.
In recent years, esports has grown significantly, becoming a mainstream form of entertainment where skilled video gamers play competitively. As per a report by Grand View Research, the global video game market is estimated to reach $583.69 billion, growing at a CAGR of 13.4% during the forecast period.
Meanwhile, the U.S. video game market is expected to grow at a CAGR of 12% from 2023 to 2030.
The growing adoption of cutting-edge technologies further enhances the market’s prospects. In recent times, virtual reality (VR) technology carved its space within the gaming industry, shaping an entirely new gaming generation that gives the players immersive, first-person perspective experiences.
Moreover, the growing pervasiveness of AI across VR applications has enhanced virtual characters' intelligence, delivering a rich, immersive gaming environment. The global generative AI in gaming market is projected to register an impressive 23.3% CAGR during the forecast period from 2023 to 2032.
Gambling is still one of the most popular forms of entertainment worldwide. According to a study by the industry's national trade association, the casino gambling industry in the U.S. generates around $329 billion a year in economic activity. The U.S. casino industry continues to have its best year and is on a pace to exceed the $60 billion it won from gamblers in 2022.
Also, the increased demand for online gambling will likely propel the casino market’s growth in the foreseeable years.
In an entertainment landscape dominated by digital experiences, the standing power of sports and theme parks remains. The global amusement parks market is projected to grow to $68.80 billion by 2028 at a CAGR of 4.8% from 2023 to 2028. Increasing urbanization and considerable growth in the travel and tourism industry are key factors fueling the market’s expansion.
Given these encouraging trends, investing in top entertainment stocks FUN, GDEN, and GRVY could be wise in December.
Let’s discuss the fundamentals of these stocks in detail:
Cedar Fair, L.P. (FUN)
FUN owns and manages amusement and water parks and complementary resort facilities in the United States and Canada. Its amusement parks include Cedar Point, Knott’s Berry Farm near Los Angeles, California’s Great America in Santa Clara, and many more. Also, it operates Castaway Bay Indoor Waterpark Resort, Hotel Breakers, and Cedar Point’s Express Hotel.
On November 3, FUN and Six Flags Entertainment Corporation (SIX) announced a definitive merger agreement to combine in a merger of equals transaction. The combined company will be a leading amusement park operator, benefitting from an expanded and complementary portfolio of 42 iconic parks and nine resort properties across 17 states, Canada, and Mexico.
In addition to a diversified footprint and improved guest experiences, the newly formed combination will have a robust operating model and a solid revenue and cash flow generation profile.
On September 26, FUN announced the opening of Cedar Point Esports on October 6, 2023. This opening marked the company’s stepping into the virtual world as it expanded into esports and gaming entertainment. The new gaming facility will initially cover an area of more than 1,000 square feet within the existing Cedar Point Sports Center.
“Our long-term strategy is focused on delivering immersive entertainment experiences that differentiate our parks and make our guests want to come back again and again,” said Richard A. Zimmerman, FUN’s President and Chief Executive Officer.
For the third quarter that ended September 24, 2023, FUN reported a net revenue of $842.01 million. Revenue from the Food, merchandise and games segment increased 3.2% year-over-year to $281.55 million. The company’s adjusted EBITDA grew 7.3% from the year-ago value to $388.49 million.
Analysts expect FUN’s revenue and EPS for the second quarter (ending June 2024) to increase 5.7% and 21.3% year-over-year to $529.35 million and $1.26, respectively. Moreover, the company topped the consensus revenue estimates in three of the trailing four quarters.
FUN’s stock has gained 1.9% over the past month to close the last trading session at $39.49.
FUN’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Quality. Within the Entertainment – Sports & Theme Parks industry, FUN is ranked first among 15 stocks.
Click here to access additional ratings of FUN for Growth, Momentum, Value, Sentiment, and Stability.
Golden Entertainment, Inc. (GDEN)
GDEN owns and operates a diversified entertainment platform, including a portfolio of gaming and hospitality assets focussing on casinos, branded taverns and distributed gaming operations. With its distributed gaming operations in Nevada and Montana, GDEN operates video gaming devices at nearly 1,000 locations.
On September 13, GDEN completed the sale of its distributed gaming operations in Montana to J&J Ventures Gaming, LLC. J&J Gaming acquired Golden Entertainment’s Montana Distributed Gaming Operations for an aggregate cash consideration of nearly $109 million.
On July 26, GDEN completed the sale of Rocky Gap Casino Resort for an aggregate cash consideration of approximately $260 million, subject to customary working capital adjustments to Century Casinos, Inc.
Under the terms of the agreements, Century Casinos, Inc. (CNTY) acquired the operations of Rocky Gap for nearly $56.10 million, and VICI Properties Inc. (VICI) acquired an interest in the land and buildings associated with Rocky Gap for approximately $203.9 million.
Completing these sales will strengthen GDEN’s balance sheet, allow the return of capital to shareholders, and provide financial flexibility to improve shareholder value.
GDEN’s revenue and EBITDA have grown at respective CAGRs of 6% and 7.7% over the past five years. The company’s EBIT has increased 16.8% over the same timeframe, while its tangible book value and total assets have improved at CAGRs of 50.1% and 2.1%, respectively.
For the third quarter that ended September 30, 2023, GDEN reported a total revenue of $257.73 million. Revenues from Nevada Casino Resorts grew 6.7% year-over-year to $105.52 million. The company’s operating income was $323.71 million, up 823.5% from the prior year’s quarter.
Furthermore, the company’s net income grew 1622.6% and 1,640% year-over-year to $241.22 million or $7.83 per share, respectively.
Analysts expect GDEN’s EPS for the fiscal year (ending December 2023) to increase 244.1% year-over-year to $8.98. Moreover, the company has surpassed the consensus revenue estimates in three of the trailing four quarters.
Shares of GDEN have surged 1.7% over the past month and 5.7% year-to-date to close the last trading session at $37.61.
GDEN’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
GDEN has a B grade for Sentiment, Quality, and Value. It is ranked #3 out of 25 stocks in the Entertainment – Casinos/Gambling industry.
In addition to the POWR Ratings we’ve stated above, we also have GDEN ratings for Growth, Stability, and Momentum. Get all GDEN ratings here.
Gravity Co., Ltd. (GRVY)
Headquartered in Seoul, South Korea, GRVY develops and publishes online and mobile games in South Korea, Taiwan, Thailand and the U.S. The company provides massive multiplayer online role-playing games, including Ragnarok Online, Dragonica, Ragnarok Online II, and Ragnarok Prequel II.
On October 26, GRVY officially launched its new roguelike game, Wetory, on Nintendo Switch. Wetory is a 3D action roguelike game with magnificent cartoon-like graphics. The storyline follows the main character, whose feet leak watercolors, on a journey to regain the lost colors of the world from a villain.
Alex Won, Business PM in Gravity Console part, said, “Wetory is officially being launched on multiple platforms to bring joy to users around the world. We believe that users will enjoy playing it, with its unique qualities that set it apart from other games. On Steam, in particular, we recommend taking advantage of the discount event.”
On September 20, GRVY announced the launch of Ragnarok Landverse, an MMORPG blockchain PC game in Southeast Asia, the Middle East, India, Africa and Oceania. Ragnarok Landverse is a sequel of the original MMORPG PC game, Ragnarok Online, with newly added blockchain features.
GRVY’s revenue and EBITDA have grown at respective CAGRs of 27.5% and 40.2% over the past three years. The company’s EBIT has increased at a CAGR of 40.2% over the same timeframe, while its net income has improved at a CAGR of 44.2%.
During the third quarter that ended September 30, 2023, GRVY’s total net revenue increased 72.1% year-over-year to $130.69 million. Its gross profit grew 37% from the prior year’s quarter to $43.26 million. The company’s operating profit amounted to $28.13 million, up 78.1% year-over-year.
In addition, the company’s profit for the year rose 80.1% year-over-year to $21.50 million, and its earnings per share came in at $3.09, an increase of 80.2% from the previous year’s period.
Over the past six months, the stock has gained 29.7% and 81.7% over the past year to close the last trading session at $74.19.
GRVY’s POWR Ratings reflect its bright prospects. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
GRVY has an A grade for Value. The stock has a B grade for Sentiment, Growth, and Quality. It is ranked #2 among 18 stocks within the B-rated Entertainment – Toys & Video Games industry.
To see the other ratings of GRVY for Momentum and Stability, click here.Top of Form
What To Do Next?
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FUN shares were unchanged in premarket trading Tuesday. Year-to-date, FUN has declined -2.48%, versus a 20.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 Entertainment Stocks Set to Outpace the Market in December StockNews.com
