The entertainment industry is fueled by increasing demand for streaming services and entertainment companies’ growing adoption of AI. Given the industry’s steady growth prospects, investors could consider watching quality entertainment stocks Urban One, Inc. (UONEK), The New York Times Company (NYT), and Lee Enterprises, Incorporated (LEE) in September.
The entertainment industry is seeing rapid globalization, with content being created and consumed globally. The emergence of streaming services and digital distribution platforms has enabled content creators to reach wider international audiences.
This globalization is expected to facilitate cross-cultural exchanges, leading to diverse content offerings and collaborations between international production houses. According to the latest research study, the global entertainment industry is expected to reach around $49.56 billion by 2032, at a CAGR of about 11%.
Moreover, industry leaders are turning to artificial intelligence (AI) tools, harnessing the power of machine learning algorithms and natural language processing to enhance content quality and anticipate audience engagement through personalized suggestions.
In addition, the publishing market is estimated to increase by $18.35 billion within 2027, driven by factors such as the growing impact of e-books, the increase in Internet penetration and high browsing speed, and the changing business dynamics of the publishing industry.
Considering these conducive trends, let’s take a look at the fundamentals of the three best Entertainment - Publishing stocks, starting with number 3.
Stock #3: Urban One, Inc. (UONEK)
UONEK operates as an urban-oriented multi-media company in the United States. The company operates through four segments, Radio Broadcasting; Cable Television; Reach Media; and Digital.
UONEK’s trailing-12-month gross profit margin OF 74.69% is 51.3% higher than the 49.37% industry average. Its levered FCF margin of 16.53% is 106.4% higher than the 8.01% industry average.
UONEK’s net revenue rose 10.1% year-over-year to $484.60 million during the fiscal year that ended December 31, 2023. Its net income increased 2.2% year-over-year to $39.96 million. Additionally, its adjusted EBITDA rose 10.2% year-over-year to $165.59 million. Net income per share increased 4.1% year-over-year to $0.76.
Over the past year, the stock has gained 34.2% to close the last trading session at $5.50.
UONEK’s POWR Ratings reflect its promising outlook. 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, with each factor weighted to an optimal degree.
The stock has a B grade in Value, Stability, and Sentiment. It is ranked #2 out of 8 stocks in the B-rated Entertainment - Publishing industry.
Beyond what is stated above, we’ve also rated UONEK for Momentum, Growth, and Quality. Get all UONEK ratings here.
Stock #2: The New York Times Company (NYT)
NYT provides news and information for readers and viewers across various platforms worldwide.
NYT pays $0.44 annually as dividends. This translates to a yield of 1% at the current market price, compared to the four-year average dividend yield of 2.5%.
NYT’s trailing-12-month EBIT margin of 11.38% is 33.8% higher than the 8.50% industry average. Its trailing-12-month net income margin of 7.54% is 82.6% higher than the 4.13% industry average.
For the fiscal second quarter that ended June 30, 2023, NYT’s total revenue increased 6.3% year-over-year to $590.85 million. Its adjusted operating profit and adjusted EPS grew 20.9% and 35.7% from the prior year’s quarter to $92.17 million and $0.38, respectively.
Street expects NYT’s EPS for the fiscal third quarter (ending September 2023) to increase 36.1% year-over-year to $0.29. Its revenue is expected to increase 7.5% year-over-year to $588.84 million for the same quarter. The company has surpassed consensus EPS estimates in each of its trailing four quarters, which is impressive.
The stock has gained 37.7% year-to-date to close the last trading session at $44.68.
NYT’s strong fundamentals are reflected in its POWR Ratings. It has an A grade in Quality. Within the same industry, it is ranked #3.
Click here to see the other ratings of NYT (Momentum, Growth, Value, Sentiment, and Stability).
Stock #1: 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, niche publications, and web hosting and content management services.
LEE’s trailing-12-month net income margin of 57.98% is 17.4% higher than the 49.37% industry average. Its trailing-12-month asset turnover ratio of 0.95x is 96% higher than the 0.48x industry average.
In the fiscal third quarter (ended June 25, 2023), LEE’s total operating revenue came in at $171.31 million, while its operating income increased 89.6% year-over-year to $12.21 million. The company’s net income increased 988.8% year-over-year to $2.13 million. Also, its earnings per common share came in at $0.25 as compared to negative $$0.05.
Analysts expect LEE’s revenue for the fourth quarter (ending September 30, 2023) to be $173.40 million. Its EPS is expected to be $1.40 in the same quarter.
LEE’s shares gained 1.9% intraday and to close the last trading session at $11.75.
It’s no surprise that LEE has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
It has a B grade for Value, Quality, Sentiment, and Stability. Within the same industry, it is ranked first.
In addition to the POWR Ratings we’ve stated above, we also have LEE’s ratings for Growth and Momentum. Get all LEE ratings here.
What To Do Next?
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UONEK shares were trading at $5.51 per share on Thursday morning, up $0.01 (+0.18%). Year-to-date, UONEK has gained 46.54%, versus a 16.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
3 Entertainment Stocks to Consider Watching in September StockNews.com
