The Next Media Giants: 3 Stocks to Buy for Blockbuster Returns
The rosy, demand-rich period of the COVID-19 pandemic is over, and media stocks haven’t been faring well as of late. The sheer number of streaming services results in a dizzying array of things to watch. Sprinkle in decreasing ratings, increasing costs, and difficulty producing original content, and we have a recipe for disaster.
Of course, not all companies are in the mud. Despite turbulent times and unflattering outlooks, some media stocks are chugging along quite nicely. These companies manage to maintain profitability, meet targets, and continue on a growth trajectory. As investors, these are the ones you’ll want to have in your portfolio. So, let’s look at three of the most promising media stocks to engage your growth.
Paramount Global (PARA)
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Paramount Global (NASDAQ:PARA) is one of the biggest media corporations and one of the most recognizable media brands in the world. The company is a result of the merger of CBS Corporation and Viacom, two media giants in their own right. Currently, PARA operates in three distinct segments: TV Media handles local and international broadcast channels and networks like Showtime, CW, MTV, and their syndicated properties; Filmed Entertainment, which covers Paramount Pictures; and Direct-to-Consumer, which handles Paramount+.
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PARA’s first two quarters in 2023 delivered negative EPS (-55.56% and -25% surprises), which might explain its current Hold rating from analysts. But don’t cross the company off your media stocks to buy list just yet. Its last two quarters have shown a significant change in direction, as earnings turned positive and topped expectations by 1,100% and 275%, respectively.
Furthermore, recent filings showed great promise for its Direct-to-Consumer segment, where revenue grew 38% year-over-year (YoY). Paramount+ subscription revenue grew 46% this last quarter, while total revenue increased by 61%. However, that wasn’t quite enough to bring the segment’s bottom line up to positive territory. Still, adjusted OIBDA increased by 31%, and the company is confident that full-year numbers will be better than last year.
On top of that, rumors are circulating that Paramount is in talks with Warner Bros. about a possible merger. Any confirmation on this front may be a significant factor in driving stock prices up.
The Walt Disney Company (DIS)
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The Walt Disney Company’s (NYSE:DIS) meteoric rise to become the biggest media conglomerate in the world is one for the books. Starting as an animation company nearly a century ago, DIS grew into an entertainment juggernaut through various strategic acquisitions, toy sales, theme parks, and property ventures. Disney owns some of the biggest and most profitable names in media entertainment, like Lucas Films (Star Wars), 20th Century Studios (Planet of the Apes), and the ever-present Marvel Studios (Avengers, X-Men). The company’s most recent foray into expansion can be seen in the Disney+ streaming service, which has come to challenge Netflix (NASDAQ:NFLX) in subscriber count a mere four years into its inception. Unsurprisingly, the company is consistently ranked among the best media stocks to buy.
Disney’s media ventures have had difficulties in the previous years after the end of the massive, unprecedented successes of some of its IPs. Bob Iger, then-CEO during the company’s best years, has come out of retirement to set things right. Under his leadership, DIS shifted its focus to Entertainment (films) and Experiences (parks) and aggressively managed its cost base to improve its bottom line. Recent EPS is reflecting these improvements, which exceeded expectations by 22.39%. Meanwhile, the company’s total FY’23 revenue ended 7% higher.
Furthermore, DIS’s combined streaming services—Disney+, Hulu, ESPN, and others—are expected to become profitable by Q4’24 (ending September 30, 2024). Analysts are hotly anticipating future improvements for the company, judging from their Strong Buy recommendations.
Warner Music Group Corp (WMG)
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One of the “Big Three” in music, Warner Music Group Corp (NASDAQ:WMG) is a holding company that operates through Recorded Music and Music Publishing segments. WMG’s publishing operations have the rights to over a million songs in circulation and have signed over 65,000 artists. One of Warner Music’s most notable claims to fame is being the first standalone music company to go public in the United States.
Warner Music had a rough start in FY’23, but its recent quarter results make up for it. “With [these] tailwinds at our back, we’ve been working hard to build a WMG that will excel in the music industry of tomorrow and look forward to bringing you incredible music in 2024 from our extraordinary artists and songwriters,” said CEO Robert Kyncl.
Revenue climbed 6% (5% in constant currency) while net income increased by a modest 2.67%, from $150 million to $154 million YoY. Revenue from different segments was up across the board, with Music Publishing reaching double-digit growth at 17%. This quarter also marks the company’s second consecutive positive EPS surprise (36%).
Notably, this is the first time in WMG’s operations that full-year revenue exceeded $6 billion. With positive outlooks and increased analyst confidence, WMG is shaping up to be one of the best media stocks to buy right now.
On the date of publication, Rick Orford did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Rick Orford is a Wall Street Journal best-selling author, investor, influencer, and mentor. His work has appeared in the most authoritative publications, including Good Morning America, Washington Post, Yahoo Finance, MSN, Business Insider, NBC, FOX, CBS, and ABC News.
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