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Why Discovery Stock Gained 13% in April

Demitrios Kalogeropoulos, The Motley Fool

What happened

TV network Discovery (NASDAQ: DISCK) (NASDAQ: DISCA) (NASDAQ: DISCB) outperformed the market last month, as the stock gained 13% compared to a 4% jump in the S&P 500, according to data provided by S&P Global Market Intelligence.

The increase put shareholders' returns ahead of the market so far in 2019, although the stock remains well below the all-time highs set in 2014.

A mother and daughter watching TV.

Image source: Getty Images.

So what

April's rally came after investors cheered news that Discovery is finding better ways to monetize its huge portfolio of TV content. To that end, the company announced last month that shows from many of its most popular brands -- including Discovery, HGTV, and Food Network -- will join YouTube TV's paid service. That offering gives Discovery another outlet to consumers that should help it offset a steady decline in broadcast TV ratings.

Now what

Discovery executives said in early May that they were encouraged by the initial results from the YouTube deal, and they affirmed their broader guidance for the full year. This period is likely to include sluggish overall growth and rising profitability thanks to efficiencies gained from the addition of the Scripps Networks franchises. Management is hoping that their new positioning and larger portfolio will then start delivering better sales growth even as viewers migrate away from the traditional pay-TV broadcast ecosystem.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Discovery (C shares). The Motley Fool has a disclosure policy.