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The four-month Writer’s Guild of America strike has ended. The guild and the media industry agreed on a three-year deal to help protect current and upcoming writers, with the contract's total value reaching around $233 million. Everything is returning to the status quo, and late-night shows have returned after the prolonged standoff.
Media stocks have been battered by bad news during negotiations. While this has served as a significant bearish catalyst for studios and media companies, it also gives investors an excellent opportunity to buy "buy-rated" companies at an attractive price. Now that an agreement has been made, should we look into media stocks now?
Analyst Ratings give investors a quantifiable view of market experts' expectations and sentiments toward a particular stock, ranging from “Strong Sell” to “Strong Buy.” A buy rating suggests that analysts see potential and is highly favorable for the business. Let's look at three buy-rated media stocks trading at attractive levels.
Warner Bros. Discovery, Inc (WBD)
Warner Bros. Discovery, Inc. is a media and entertainment company that produces feature films and provides streaming services, licensing, and other television programs. The company operates in three segments: studios for its film and theater production and release; DTC segment for the premium pay-TV and streaming services; and lastly, Networks for its international and television network operations.
WBD’s strength as a media company mainly comes from its strong roster of unscripted and scripted content from its studios. Its multiple revenue streams from movies like the recently successful Barbie show the strength of WBD in filmmaking, and streaming platforms like HBO, MAX, and Discovery put it in a profitable trajectory. In addition, licensing to significant franchises like DC Comics (Batman, Wonder Woman, Superman, etc.), HBO (Game of Thrones), WB Pictures (Harry Potter), and Adult Swim/Cartoon Network (Rick and Morty) provides additional avenues for licensing income. With the Hollywood strike ending and the deal, WBD can make new and exciting media content to renew the industry’s vigor.
Analyst Ratings
Analysts rate WBD as a “Moderate Buy” based on 12 Strong Buys, 2 Moderate Buys, 7 Holds, and 1 Strong Sell. The mean target is $18.80, and the high target is $33.00, representing a possible upside of 220.70%.
The Walt Disney Company (DIS)
The Walt Disney Company is one of the most popular — if not the most popular — media and entertainment companies worldwide. It’s renowned for its animated movies, theme parks, and IPs. The company operates in segments like Disney Media and Entertainment Distribution, which consists of licensing, linear networks, and direct-to-consumer services; Disney Parks, Experiences and Products for food, beverage, and sales of food and merchandise in its is theme parks, cruise vacations; lastly, its Content Sales/Licensing segment takes care of its film and episodic television sales as well video on demand service.
What makes DIS a good choice is the value of its distinctive assets. This can come from spin-offs of its existing IP, like its current Star Wars universe and various original Disney franchises. The company also owns legacy franchises like ESPN, ABC network, FX, and other linear networks. Disney recently announced a partnership with Penn Entertainment for ESPN Bet, and the company is also working hard to reduce costs and lower its spending by $5.5 billion to boost its margins further and increase performance. This is why we think DIS is now attractive to pick up.
Analyst Ratings
Analysts rate DIS as a “Moderate Buy” based on 15 Strong Buys, 2 Moderate Buys, 6 Holds, and 1 Strong Sell. The mean target is $111.58, and the high target is $146.00, a possible upside of 84.06%.
Comcast Corporation (CMCSA)
Comcast Corporation is one of the largest broadcasting and cable stations based on revenue. CMSCA offers broadband, distributable video, stream entertainment, and sports. The company operates under two segments: connectivity and platform for its broadband and wireless connectivity via its Comcast and Xfinity brands, and Content and Experience for its entertainment and media business for its news, sports, and entertainment distribution and production. Even though the company is well-known as a broadband provider, it has a firm footing in media like NBC Universal and Dreamworks Animation.
Comcast is in talks with Disney to sell its 33% minority share of Hulu. This will help CMSA increase its share buyback program, which is expected to continue till 2024. The company has also been performing well in financials; its EPS beat analyst estimates by 15.31% in the last quarter. CMCSA’s net income is also growing, with the latest quarter getting a 10.80% boost from Q1, making it a worthy bet on the potential media comeback.
Analyst Ratings
Analysts rate CMSA as a “Moderate Buy” based on 13 Strong Buys, 1 Moderate Buy, and 7 Holds. The mean target price is $49.17, and the high target is $55.00, 26.52% more than the current trading price.
Final thoughts
Investing in companies affected by short-term news often provides excellent opportunities to buy them at a lower, better price point. However, it is still important to run your due diligence to assess the impact of such catalysts on the company's long-term future. This will help you see if companies are being sold due to exaggerated reactions to the news or if there are legitimate reasons why investors are running away from them.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
