Although the economy has been under pressure due to inflation and restrictive monetary policy, rapid advancements in technology and digitalization could fuel the growth of the entertainment industry.
Entertainment stocks Boyd Gaming Corporation (BYD), The New York Times Company (NYT), and Lee Enterprises, Incorporated (LEE) have managed to perform well despite the uncertain macroeconomic environment. To that end, it could be wise to take a look at these stocks.
Entertainment is becoming increasingly digital with access to high-speed internet connectivity and the growing demand for on-demand, personalized content. Technological advancements like virtual and augmented reality are transforming the entertainment and media landscape.
Minutes from the Fed’s March meeting show that the staff expects a mild recession due to the banking crisis by the end of the year. During economic uncertainty, people may cut down on their discretionary expenditures, such as travel and dining out, and seek cheaper entertainment options, such as gaming, streaming services, etc.
This might lead to higher revenues for entertainment companies during economic uncertainty.
According to Statista, total revenue in the Entertainment segment is anticipated to expand at a CAGR of 11.1%, resulting in a market volume of $12.74 billion by 2027. Moreover, the global digital newspapers & magazines market is expected to expand at a CAGR of 4.2% from 2022 to 2028.
Given these factors, entertainment stocks BYD, NYT, and LEE could be worth buying.
Boyd Gaming Corporation (BYD)
BYD operates as a multi-jurisdictional gaming company in several states across the US. It operates through three segments: Las Vegas Locals, Downtown Las Vegas, and Midwest & South.
On November 1, 2022, BYD announced the completion of the acquisition of Pala Interactive LLC and its subsidiaries.
BYD’s president and CEO, Keith Smith, said, "The acquisition of Pala Interactive provides us with the technology, products, and expertise to create a profitable regional online casino business. We look forward to working with the Pala Interactive team in executing our online casino gaming strategy, which will complement our existing land-based operations and further expand our nationwide customer base."
In terms of the trailing-12-month EBIT margin, BYD’s 28.78% is 269.3% higher than the 7.79% industry average. Its 15.97% trailing-12-month levered FCF margin is 646.2% higher than the 2.14% industry average. Likewise, its 17.98% trailing-12-month net income margin is 306.3% higher than the industry average of 4.43%.
BYD’s total revenues increased 4.9% year-over-year to $922.92 million for the fourth quarter that ended December 31, 2022. The company’s adjusted EBITDA increased 3.8% from the prior-year quarter to $333.27 million.
Its adjusted earnings rose 17.8% year-over-year to $181.76 million. In addition, its adjusted EPS came in at $1.72, representing a 27.4% increase from the year-ago period.
BYD's EPS and revenue for the quarter ended March 31, 2023, are expected to increase 10% and 3.4% year-over-year to $1.54 and $889.59 million, respectively. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past six months, the stock has gained 25.3% to close the last trading session at $67.36.
BYD’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Entertainment - Casinos/Gambling industry, it is ranked #5 of 29 stocks. In addition, it has an A grade for Quality and a B for Momentum and Sentiment. We have also given BYD grades for Growth, Value, and Stability. Get all BYD ratings here.
The New York Times Company (NYT)
NYT provides news and information for readers and viewers across various platforms worldwide. It offers The New York Times (The Times) as well as an international edition of The Times and operates the NYTimes.com website.
In terms of the trailing-12-month EBIT margin, NYT’s 11.15% is 37% higher than the 8.14% industry average. Its 11.09% trailing-12-month Return on Common Equity is 277.7% higher than the 2.94% industry average. Likewise, its 7.63% trailing-12-month net income margin is 125.5% higher than the industry average of 3.38%.
For the fiscal fourth quarter that ended December 31, 2022, NYT’s total revenues increased 12.3% year-over-year to $667.54 million. The company’s net income attributable to NYT common stockholders increased 1.3% year-over-year to $70.79 million. Its adjusted EPS came in at $0.59, representing an increase of 37.2% year-over-year.
NYT’s EPS for the quarter ending June 30, 2023, is expected to increase 7.3% year-over-year to $0.26. Its revenue for the quarter ending May 31, 2023, is expected to increase 5.9% year-over-year to $569.18 million. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past six months, the stock has gained 38.9% to close the last trading session at $39.77.
NYT’s POWR Ratings reflect this positive outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
Within the Entertainment - Publishing industry, it is ranked #2 out of 9 stocks. The stock has a B grade for Growth and Quality. Click here to access the POWR Ratings of NYT for Value, Momentum, Stability, and Sentiment.
Lee Enterprises, Incorporated (LEE)
LEE provides local news and information and advertising services in the United States. The company offers print and digital editions of daily, weekly, and monthly newspapers and niche publications; and web hosting and content management services.
On March 10, 2023, LEE received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (Nasdaq), indicating that the company complies with listing standards. This letter closes the listing standard delinquency matter opened by Nasdaq on December 28, 2022.
In terms of the trailing-12-month gross profit margin, LEE’s 56.84% is 13.2% higher than the 50.22% industry average. Its 5.99% trailing-12-month Return on Total Capital is 69.1% higher than the 3.54% industry average. Likewise, its 0.97x trailing-12-month asset turnover ratio is 107.7% higher than the industry average of 0.47x.
LEE’s digital advertising revenue for the first quarter ended December 25, 2022, increased 12% year-over-year to $47.75 million. Its digital subscription revenue rose 56% year-over-year to $12.33 million. Its total assets for the first quarter ended December 25, 2022, came in at $747.70 million, compared to $744.04 million for the fiscal year ended September 25, 2022.
LEE’s revenue for fiscal 2024 is expected to increase 2.3% year-over-year to $729.75 million. Over the past month, the stock has declined 5.4% to close the last trading session at $11.85.
The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It is ranked first in the same industry. Also, it has a B grade for Value, Stability, Sentiment, and Quality. To see the other POWR Ratings of LEE for Growth and Momentum, click here.
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BYD shares were trading at $66.96 per share on Tuesday morning, down $0.40 (-0.59%). Year-to-date, BYD has gained 23.13%, versus a 7.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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