1:43 p.m. PDT 6/30/2020
Analyst says there may be an “exaggeration” of negative expectations among media and entertainment investors.
Major media and entertainment stocks rebounded in the second quarter – as did the broader market, investors seemingly largely ignoring concerns about the new coronavirus pandemic and the recession it may cause – but remain in negative territory for l ‘year.
Investors in the sector were already concerned about the cord cut, the continued rise of streaming giants like Netflix and new services, such as TikTok, attracting the attention of the youngest. Then the pandemic hit in March, causing Hollywood stocks to drop amid closed cinemas, the end of live sports, an interruption in film and television production, and concerns about the fallout from the recession caused by the virus. And given the lack of experience in the past with the effect of a global pandemic on Hollywood stocks, Wall Street has continued to debate the duration and the lasting impact it will have on the sector.
As the dust settled in the first half of 2020 at the close of the market on Tuesday, US stocks appeared to have had the best quarter in more than 20 years. But while the shares of many large entertainment companies rose in the second quarter, they finished the first half down much more than the S&P 500 stock index, which was down about 5% midway through the year despite a 20% gain in the last three months.
Netflix, whose strong gain in subscribers in the first quarter indicated it had benefited from home orders worldwide, gained 41% since the start of the year, including more than 20% in the second quarter. Video game titles are also key winners, with Activision up 28%, Electronic Arts up 22% and Take-Two Interactive up 13% since the start of the year.
Among the entertainment biggies, the US-listed stocks of Sony Corp. are the only winner for the first six months of the year, finishing them up 1.5% after earning more than 16% in the second quarter alone. NBCUniversal owner Comcast ended the first half down 13.3% (despite a 13% gain in the second quarter), Walt Disney finished it down 24% (but up more than 16 % in the last quarter), and the owner of WarnerMedia AT&T ended the first half down 22.6% (after an increase of 3% in the last three months).
Meanwhile, the shares of Fox Corp. fell 26.4% in the first half (but increased 13% in the second quarter), ViacomCBS being the weakest among the industry giants for the year so far with a drop of 44, 3%, but having an extraordinary second quarter which saw it climb by more than 65%.
Among smaller entertainment companies, Lionsgate share fell 30.5% in the first half (but rose 21% in the last quarter, Discovery fell 35.4% (up 9% during AMC Networks shares were down 40.6% for the year (and also fell slightly in the second quarter).
Movie groups were among the hardest hit titles in the industry in general due to movie theater closings in the last quarter due to the pandemic. AMC Theaters shares ended the first half of 2020 down 41%, while Imax Corp. finished it down 45% and Cinemark fell 60%.
“The cyclical components and the high debts are finally recognized by the market,” said Hal Vogel, CEO of Vogel Capital Management and former Wall Street analyst. THR. And the pandemic means less income. “For example, Disney and Comcast have theme parks that will operate at split capacity …[and] advertising is still falling “despite some recent suggestions that the worst pandemic decline was now behind the industry.
Michael Morris, an analyst at Guggenheim Securities, expects stocks in the sector to remain under pressure, but in a June 15 report, he also wrote: “We want investors to stay focused on benchmarks, d ‘estimate and discussion of the sector, indicating an exaggeration of gradually negative expectations compared to the sentiment of advertisers and consumers. “
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