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“First Digital Advertising Recession”: 10 Media Stocks Crushed in 2022

·10 min read

In this article, we will look at the 10 media stocks that got crushed in 2022. If you want to explore similar stocks, you can also take a look at 5 Media Stocks Crushed in 2022.

"First Digital Advertising Recession"

According to a report from Financial Times, some of the major players in the U.S. media industry have lost nearly $400 billion of their value year to date. As the world reopened and people started heading outdoors, consumers unsubscribed to their plans provided by streaming giants such as Netflix, Inc. (NASDAQ:NFLX).

Netflix, Inc. (NASDAQ:NFLX) has reportedly lost subscribers for two consecutive quarters in 2022. As of August 5, legacy media companies such as Netflix, Inc. (NASDAQ:NFLX), Warner Bros. Discovery, Inc. (NASDAQ:WBD), and The Walt Disney Company (NYSE:DIS) have lost more than 30% of their value year to date.

Media giants have crashed to half of their all-time highs from the COVID-19 pandemic. As the world went back to physical operations, streaming and advertising companies took a tumble. With the Fed raising interest rates to anchor inflation expectations, businesses are cutting back on their advertising spending.

Talking to Financial Times, Rich Greenfield, an analyst at technology and media research firm LightShed, said:

“There’s been a pretty massive shift from believing in the streaming future, to recognition that . . . the streaming future is not nearly as profitable or as valuable as people had thought.”

A looming recession is causing people to cut down discretionary spending and analysts think we are living through the "first digital advertising recession". According to the Financial Times' analysis, U.S. media giants have crashed from trading at 49 times earnings to 19 times earnings. However, companies that generate their revenue from conventional TV and film services have managed to remain resilient to the "first digital advertising recession", simply due to their long-term contracts for retransmission and broadcasting fees.  Michael Nathanson, an analyst at media consultancy MoffettNathanson, reportedly said:

“We are living through the first digital advertising recession, the likes of which we’ve never seen before.”

Photo by Ashley Byrd on Unsplash

Our Methodology

To determine the 10 media stocks that crashed in 2022, we reviewed the global entertainment & media industry and identified major players in the TV advertising and streaming services space. We narrowed down our selection to companies that have reported slowing demand for their products and services and whose shares have dipped significantly in 2022. Along with each stock, we have mentioned the hedge fund sentiment, analyst rating, and its year-to-date decline as of August 5. We have ranked our picks in increasing order of their year-to-date declines in 2022.

10. Fox Corporation (NASDAQ:FOXA)

Number of Hedge Fund Holders: 38

Year to Date Loss as of August 5: 11.45%

On July 26, Goldman Sachs analyst Brett Feldman slashed his price target on Fox Corporation (NASDAQ:FOXA) to $30 from $32 and reiterated a Sell rating on the shares. Based on his analysis of the historic negative correlation between economic activity and the TV advertising industry, Feldman sees advertising revenue suffering in an economic slowdown and therefore cut his price targets across the space.

On July 27, Evercore ISI analyst Vijay Jayant cut his price target on Fox Corporation (NASDAQ:FOXA) to $38 from $44 and maintained an In-Line rating on the shares. While the analyst is relatively positive on The Walt Disney Company (NYSE:DIS) and Warner Bros. Discovery, Inc. (NASDAQ:WBD), he sees Paramount Global (NASDAQ:PARA) and Fox Corporation (NASDAQ:FOXA) as more vulnerable to an economic slowdown and sees declining advertising revenue and Pay TV industry subscribers.

Fox Corporation (NASDAQ:FOXA) is taking a beating in 2022. As of August 5, Fox Corporation (NASDAQ:FOXA) has plummeted by 11.45% year to date.

At the end of Q1 2022, Fox Corporation (NASDAQ:FOXA) was spotted on 38 hedge fund portfolios. The total stakes of these hedge funds amounted to $880.90 million. This is compared to 31 positions in Q4 2021 with stakes worth $702.03 million.

As of June 30, Yacktman Asset Management owns more than 8.6 million shares of Fox Corporation (NASDAQ:FOXA) and is the largest shareholder in the company. The investment covers 2.66% of Yacktman Asset Management's 13F portfolio.

9. Comcast Corporation (NASDAQ:CMCSA)

Number of Hedge Fund Holders: 78

Year to Date Loss as of August 5: 24.58%

On July 28, Comcast Corporation (NASDAQ:CMCSA) reported earnings for the fiscal second quarter of 2022. The company reported earnings per share of $1.01 and beat expectations by $0.09. The company generated a revenue of $30.02 billion, ahead of Wall Street expectations by $346.88 million. However, for the first time, Comcast Corporation (NASDAQ:CMCSA) reported a net loss of 10,000 residential subscribers in the second quarter of 2022. The company was expected to add 84,000 net subscribers in the second quarter of 2022. As of July 2022, the company has lost roughly 30,000 broadband net subscribers since the beginning of its fiscal year.

Wall Street is bearish on Comcast Corporation (NASDAQ:CMCSA). On August 1, Barclays analyst Kannan Venkateshwar downgraded Comcast Corporation (NASDAQ:CMCSA) to Equal Weight from Overweight and slashed his price target to $42 from $48 on the shares. The analyst expects cable companies to experience flat growth in 2023, and negative growth after 2023. On August 5, Redburn analyst Steve Malcolm downgraded Comcast Corporation (NASDAQ:CMCSA) to Neutral from Buy.

At the close of Q1 2022, 78 hedge funds disclosed ownership of stakes in Comcast Corporation (NASDAQ:CMCSA). The total stakes of these hedge funds amounted to $7.12 billion, down from $8.63 billion in the previous quarter with 80 positions. The hedge fund sentiment for the stock is negative.

As of June 30, Gardner Russo & Gardner owns more than 4.72 million shares of Comcast Corporation (NASDAQ:CMCSA) and is the largest shareholder in the company. The fund's stakes were valued at $185.23 million.

Like Netflix, Inc. (NASDAQ:NFLX), Warner Bros. Discovery, Inc. (NASDAQ:WBD), and The Walt Disney Company (NYSE:DIS), Comcast Corporation (NASDAQ:CMCSA) is taking a beating in 2022 and as of August 5, has lost 24.58% of its value year to date.

8. Paramount Global (NASDAQ:PARA)

Number of Hedge Fund Holders: 40

Year to Date Loss as of August 5: 24.75%

On August 4, Paramount Global (NASDAQ:PARA) reported earnings for the fiscal second quarter of 2022. The company reported earnings per share of $0.64 and beat EPS estimates by $0.02. The company's revenue for the quarter amounted to $7.78 billion, up 18.51% year over year, and beat revenue expectations by $228.19 million.

Although the company delivered robust earnings for the second quarter of 2022, Paramount Global (NASDAQ:PARA) reported that its operating income declined by 33% and amounted to $819 million in the second quarter of 2022 and overall costs and expenses rose by 28% to $6.96 billion. The company also reported a slowdown in ad revenue and reported that in the second quarter of 2022, its ad revenues fell by 6%.

On August 5, Morgan Stanley analyst Benjamin Swinburne trimmed his price target on Paramount Global (NASDAQ:PARA) to $20 from $22 and reiterated an Underweight rating on the shares. The analyst is bearish on the company because of a macro ad slowdown. JPMorgan is also bearish on Paramount Global (NASDAQ:PARA) and on August 5, analyst Philip Cusick downgraded the stock to Underweight from Neutral and slashed his price target to $25 from $29. Cusick sees "softer" direct-to-consumer revenue and higher losses in 2022, and expects weakening EBITDA and cash flow in 2023.

Paramount Global (NASDAQ:PARA) is crashing in 2022 and as of August 5, has lost 24.75% of its value year to date.

At the end of Q1 2022, 40 hedge funds were long Paramount Global (NASDAQ:PARA) with stakes worth $3.41 billion. As of June 30, Impax Asset Management owns roughly 0.14 million shares of Paramount Global (NASDAQ:PARA) and is the largest shareholder in the company.

7. News Corporation (NASDAQ:NWSA)

Number of Hedge Fund Holders: 34

Year to Date Loss as of August 5: 25.30%

News Corporation (NASDAQ:NWSA) is a media and information services company that focuses on creating and distributing content for consumers and businesses worldwide. The company operates through six segments: Digital Real Estate Services, Subscription Video Services, Dow Jones, Book Publishing, News Media, and Other. As of August 5, News Corporation (NASDAQ:NWSA) has plummeted 25.30% year to date.

On July 28, Macquarie analyst Darren Leung downgraded News Corporation (NASDAQ:NWSA) to Neutral from Outperform and slashed his price target to $21.10, from $22.30. The analyst is bearish on News Corporation (NASDAQ:NWSA) because of its investment in the UK TV business and its legal issues with Insignia. He downgraded the stock because of a negative macro environment.

At the close of Q1 2022, News Corporation (NASDAQ:NWSA) was a part of 34 investor portfolios. The total stakes of these hedge funds amounted to $795.73 million, down from $819.48 million in the preceding quarter with 36 positions. The hedge fund sentiment for the stock is negative.

In the second quarter of 2022, Yacktman Asset Management raised its stakes in News Corporation (NASDAQ:NWSA) by 2%, bringing them to $256.33 million. As of June 30, Yacktman Asset Management owns roughly 16.45 million shares of News Corporation (NASDAQ:NWSA) and is the most prominent shareholder in the company.

6. The New York Times Company (NYSE:NYT)

Number of Hedge Fund Holders: 38

Year to Date Loss as of August 5: 35.71%

On August 3, The New York Times Company (NYSE:NYT) reported earnings for the fiscal second quarter of 2022. The company reported earnings per share of $0.24 and beat EPS estimates by $0.05. The company's revenue for the quarter came in at $555.68 million and beat estimates by $1.94 million. However, despite market-beating earnings, shares of The New York Times Company (NYSE:NYT) are suffering in 2022. As of August 5, the stock has crashed by more than 35.71% year to date.

On August 4, Morgan Stanley analyst Thomas Yeh slashed his price target on The New York Times Company (NYSE:NYT) to $37 from $40. The analyst lowered his forecasts for 2023 and 2024 as he sees digital advertising headwinds impacting the stock over the next 5 years. The analyst remains Overweight on the stock because he believes long-term growth for the company is not priced in at current levels.

At the close of Q1 2022, 38 hedge funds held stakes in The New York Times Company (NYSE:NYT). The total value of these stakes amounted to $2.19 billion, down from $2.24 billion in the previous quarter with 45 positions. The hedge fund sentiment for the stock is negative.

As of June 30, Long Corridor Asset Management is the largest shareholder in The New York Times Company (NYSE:NYT) and has stakes worth $0.83 million. The investment covers 0.7% of the fund's 13F portfolio.

Among the biggest losers of 2022, we have The New York Times Company (NYSE:NYT), Netflix, Inc. (NASDAQ:NFLX), Warner Bros. Discovery, Inc. (NASDAQ:WBD), and The Walt Disney Company (NYSE:DIS).

 

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Disclosure: None. “First digital advertising recession”: 10 Media Stocks Crushed in 2022 is originally published on Insider Monkey.