Today, let’s engage with the understated yet bustling digital renaissance in the film and TV industry as we dive into the dynamics of Warner Music Group WMG, News Corp. NWS, Lions Gate Entertainment (NYSE: LGF-A), and IMAX Corp. IMAX.
Industry: Film & TV
In a landscape reshaped by the pandemic, digital entertainment has become a lifeline for the likes of Warner Music Group, News Corp., Lions Gate Entertainment, and IMAX Corp. The surge in media consumption, driven by remote work and learning, has propelled these industry players to craft top-notch offerings backed by strategic investments. As advertising streams regain strength and production efforts restart, optimism pervades film and television production companies.
Peering Into the Industry’s Tapestry
The realm of Film and Television Production and Distribution encompasses entities engaged in the creation, dissemination, and exhibition of cinematic and small-screen content. These industry stalwarts deliver entertainment to cinemas, TV networks, on-demand platforms, and streaming services, keeping audiences enthralled.
Specializing in entertainment technologies, IMAX enriches the cinematic experience through innovative visual and auditory tools. From big-screen premieres to TV shows, these players heavily hinge on box office verdicts, global release trends, and viewership rates.
3 Paradigms Shaping Film and TV Production
Embracing Over-the-Top Services: Amid a race for eyeballs, content creators tap into over-the-top services, showcasing exclusive content and differentiated offerings. While enhancing viewer engagement, this trend nudges streaming giants towards producing in-house, impacting the distribution strategies of traditional players.
The Binge-Watching Zeitgeist: From binge-watching sprees to the ubiquity of smartphones, modern viewers stay glued to digital screens. To cater to shifting preferences, the industry gravitates towards digital content rollouts, leveraging in-depth consumer insights enabled by advanced technologies. Yet, swelling expenses on content creation and marketing squeeze margins amid fierce competition.
Empowering through Technology: Exhibitors harness cutting-edge tools like laser projection systems and immersive soundscapes to uplift the cinematic voyage. Evolving technologies such as AR and VR elevate viewer experiences, although the dawn of alternative distribution avenues tests traditional exhibitors.
Zacks Industry Rank Illuminates Growth Trajectory
Nestled within the broader consumer discretionary cohort, the Film and Television Production and Distribution industry shines with a Zacks Industry Rank #62, placing it amongst the elite quarter of over 246 Zacks sectors.
Our data underscores that industries ranked in the top half outperform bottom-ranking peers by a substantial margin. Analysts’ cheery earnings revisions for industry constituents hint at a promising growth trajectory.
Before unveiling promising portfolio candidates, let’s scan the industry’s recent market performance and valuation metrics.
Industry’s Market Parity: Striking a Balancing Act
Tracking industry trends, the Film and Television Production and Distribution cluster has trailed the Zacks S&P 500 but triumphed over its sector in the bygone year.
Together, these stocks have surged by 29.3% against the S&P 500’s 29.4% uptick and the consumer discretionary sector’s 13.9% climb over this period.
Evaluating Industry’s Worth
Based on the trailing 12-month price-to-sales ratio—a go-to barometer for Film and Television Production stock valuation—the industry now trades at 1.96X. This compares with the S&P 500’s 3.97X and the sector’s 2X valuation benchmarks.
Historically dancing between 0.92X and 2.52X over five years, the industry’s median valuation stands at 1.58X, reflecting a spectrum of market premiums.
4 Stellar Film & Television Aces on the Radar
Warner Music Group: Paving its path with a Zacks Rank #3 (Hold), Warner Music Group rides the wave of Invigorating revenue streams from Recorded Music and Music Publishing sections. Bolstered by international forays, the company shuns reliance on celebrities, marching towards a diverse revenue landscape.
Analyzing Companies Thriving Amid Market Challenges
Warner Music Group: Targeting New Audiences
Warner Music Group is strategically expanding its outreach by investing in media platforms such as HipHopDX, IMGN, and Uproxx. These ventures hold the promise of widening WMG’s global audience base of music lovers. The company’s collaboration with TikTok through a multi-year agreement is proving fruitful, granting TikTok access to Warner’s extensive repertoire.
Despite facing an 8% decline in its shares year to date, WMG remains steady with a Zacks Consensus Estimate of $1.09 per share for fiscal 2024 earnings.
IMAX: Pioneering the Movie Experience
IMAX continues to ride high on the success of blockbuster releases in 2023, complemented by strong performances in local language films across global markets. The company’s collaboration with leading multiplexes, along with a robust lineup of upcoming movie releases, bodes well for its revenue projections in 2024.
IMAX shares have surged by 9.9% year to date, with an upward revision in the Zacks Consensus Estimate for 2024 earnings to 89 cents per share.
News Corp.: Embracing Digital Transformation
News Corp. is strategically evolving through digital transformation efforts, particularly in its Real Estate Services, Dow Jones, and Book Publishing segments. The company’s recent acquisitions of OPIS and Base Chemicals businesses are poised to enhance Dow Jones’ information services, showcasing its diversification of revenue streams and operational enhancements.
With News Corp. shares up by 3.9% year to date, the Zacks Consensus Estimate for fiscal 2024 earnings stands at 72 cents per share, reflecting a slight decrease.
Lions Gate Holdings is thriving on the strength of its Motion Picture and Media Networks segments, with a surge in viewership and subscriber base driving STARPLAY Domestic revenues. The company’s strategic content planning has resulted in a substantial pipeline of content on its platforms, enhancing viewer engagement and subscriber growth.
Notably, Lionsgate’s acquisition of eOne from Hasbro for $375 million has enriched its content library and bolstered its presence in key markets. Despite a 12.2% decline in shares year to date, the Zacks Consensus Estimate for fiscal 2024 earnings remains steady at 54 cents per share.
