Showbiz Stocks 2023: Tech highs, major media companies strike back and streaming is rebooted

Roku was a champion. Lionsgate stepped up and Netflix pounced. Technology stocks soared in 2023. Major media stocks had a mixed transition year dominated by strikes in Hollywood, with declines in linear television and losses in streaming.

Biggest fall. Disney and Fox remained essentially unchanged this year. Giants Comcast and Sony, both of which also have other ventures such as broadband and gaming and music, have seen good success. Warner Bros. Discovery won a little. They are all looking for profitability in the streaming space, and progress there will affect the stock’s performance in 2024.

In comparison, 2023 was a real treat compared to a truly dismal 2022, when only two — that’s two — media stocks gained this year: WWE (now part of TKO Group) and Nexstar.

It’s been a surprisingly good 2023 for stocks in general, with the S&P 500 closing the year up more than 24%. Investors ignored high interest rates and inflation, recession fears, the threat of a government shutdown, a brief banking crisis and international turmoil, and bounced back from a year that was initially expected to be fairly bleak for markets.

Technology in particular has caused excitement, largely fueled by an AI frenzy. The famous FAANG group of stocks – Facebook (now Meta), Amazon, Apple, Netflix and Google (now Alphabet) – became the Magnificent Seven. This year they were rediscovered by an analyst (from the film): Alphabet, Amazon, Apple, Meta, Microsoft, Invidia and Tesla. This bond contributed significantly to the overall profit. Shares of neighboring technologies from Snap to Spotify also rose.

Exhibitors were divided over fears about box office prospects in 2024. Broadcast shares fell while advertising was weak, but heading for a political tsunami.

And the year will be marked by a plethora of mergers and acquisitions that haven’t happened yet, but which could also boost share prices in 2024. It doesn’t hurt that the Federal Reserve has indicated it will finally cut rates in 2024, after 11 rate hikes in the past two years. .

A closer look

Roku was the king of media in 2023 with a rise of 119%.

Remember back in March, when the company announced with alarm that it had a quarter of its cash in Silicon Valley Bank, which was devastated by the worst banking crisis since 2008. Disaster was averted when the FDIC agreed to completely liquidate all deposits. Warranty and Roku took over from there. The company is benefiting from its television advertising revenue shifting from linear to digital as it expands overseas and sells many branded smart TVs. Possibly a potential takeover target.

Disney, the only showbiz stock in the 30-member DJIA, rose slightly this year. That’s well below the annual high of $110 in January, when the market was buzzing with excitement over the return of CEO Bob Iger. But these are complicated times, with linear TV in steady decline, streaming still in the red and Disney facing a number of underperformers at the box office.

Notably, Iger acquired the rest of Hulu from Comcast, paying a pre-agreed minimum amount of $8.6 billion. The company can take on more debt because both parties have teams working to determine a valuation. He is somewhat wary of making exciting offers for ABC and linear networks and is looking for a strategic partner for ESPN ahead of a possible streaming launch. Disney has reportedly struck a deal with Reliance for its assets in India.

Wall Streeters are hoping the new year will bring an update on succession planning and possibly a contract extension with the NBA. One analyst says he’s been getting a lot of customer calls about Disney lately. “They’ll say things like, ‘Disney was mine. I just think it could be an interesting stock. There are so many moving parts right now, can you give me a quick update?’”

The company appears to be facing a proxy fight in 2024 with activist investor Nelson Peltz, who wants two seats on the board — for himself and former Disney CFO Jay Rasulo. Peltz launched a similar hostile campaign last year, but withdrew in February before a showdown at the annual meeting.

Discovery by Warner Bros is up about 10%, but still not as high as the $24 it traded at when Discovery and Warner Media merged in April 2022. CEO David Zaslav focused on increasing cash flow and paying down the company’s massive debt load, which stood at $45.3 billion at the time. End of September term. Investors were not happy with this quarter, particularly shocked by the gloomy advertising outlook.

The advertising market seems to have entered a new phase that is unfavorable for traditional media, namely the loss of pricing power, says an analyst. “In the past, when linear TV viewership declined, large companies could compensate by raising the prices they charged advertisers for remaining viewers. Last year, this game seems to have failed,” unless sports are involved.

With the two-year anniversary of Discovery and Warner Media’s merger on April 8, WBD can scrutinize deals without huge tax penalties. Zaslav has been in talks with Paramount’s majority shareholder Shari Redstone and CEO Bob Bakish about a possible deal. Warners could also be a seller, but that too is difficult, in part because of the sheer scale of existing cable networks.

Warner Bros Studio and HBO “are good companies with solid creative paths and are the heart of the business for us,” one analyst said.

Large worldwidehas now fallen by 17%. The country is under financial pressure, so there is a good chance that a deal will happen sooner or later. In talks with Zaslav and David Ellison, CEO of Skydance Media, both an outright sale and the possibility of Redstone holding his stake in NAI, the family holding company that houses his Paramount shares, were discussed. Primary common shareholders would not receive a premium for their shares in this scenario, which may be one of the reasons why deal talks have not moved the stock. There would be no regulatory hurdles for Skydance.

One of the most important entertainment stocks is Netflix 63% won. Studios have recently become willing to license shows. It has a stronger balance sheet than most major media companies and a larger backlog of unreleased content other than Disney, all of which are dedicated to streaming. It added a layer of advertising and sees the positive impact of cracking down on password sharing.

Smaller Lion’s Gate enjoyed fantastic success, up as much as 88%, as the company closed the year by acquiring eOne from Hasbro and announcing plans to combine the studio with a SPAC early next year to spin off Starz, a one hopes that it adds value.

Fox is still very popular among some analysts: no streaming losses and a focus on live sports and news. But investors like growth and some wonder what the bottom line will be. “It just is what it is,” said one. As linear television shrinks and the cost of sports rights rises, the question becomes, “What’s the story?”

Fox is facing a $2.7 billion defamation lawsuit from a second voting machine maker, Smartmatic. Earlier this year, the company agreed to an $800 million settlement shortly before trial in an initial lawsuit filed by Dominion Voting Systems.

In the exhibition, theatrical release is still an uphill battle and the strikes have disrupted production and pushed back some major films, which will slow the pace of new releases in 2024. Cinema stocks ended the year on a mixed note movie theater – the chain number 3 – with high profits. The world’s largest exhibitor AMC Entertainment case, but analysts don’t care. It “ultimately revolves around its pre-meme historical multiple,” one person said.