The entertainment industry benefited significantly from a surge in demand for digital entertainment during the pandemic. But this trend slowed when the economy reopened, and consumers returned to theaters and in-person entertainment.
However, with the advancement in mobile, video, and wireless technologies, the demand for digital entertainment is growing and is likely to continue to bolster the sector’s growth. In addition, the global entertainment and media market is projected to grow at a CAGR of 5.9% from 2022 to 2028.
However, the industry has been under pressure due to the macro headwinds and shifting consumer behavior. The media industry struggled to maintain its momentum, as evident from the S&P 500 Media & Entertainment Index’s 44.9% decline over the past year versus the S&P 500’s 19.6%.
The industry is struggling with decreased revenues as inflation is hurting discretionary spending. Media companies’ revenues are decreasing as consumers are cutting back on entertainment and prioritizing necessities, while bottom-line costs are increasing based on content costs.
While fundamentally strong entertainment stock Comcast Corporation (CMCSA) could be worth betting on, DISH Network Corporation (DISH) and WideOpenWest, Inc. (WOW) might be best avoided considering their bleak prospects.
Stock to Buy:
Comcast Corporation (CMCSA)
CMCSA is a global media and technology company operating through five segments: Cable Communications; Media, Studios; Theme Parks; and Sky.
On December 12, 2022, CMCSA launched the world’s first live, multigigabit symmetrical Internet connection powered by 10G and Full Duplex DOCSIS 4.0. 10G technology. This technology promises to offer customers next-level net speed and performance and is expected to boost CMCSA’s product portfolio significantly.
On October 27, the company’s Board of Directors declared a quarterly dividend of $0.27 a share on the common stock, payable to its shareholders on January 25, 2023. It pays a $1.08 per share dividend annually, which translates to a 3.12% yield on the current price. Its four-year average dividend yield is 2.08%. Its dividend payments have grown at CAGRs of 8.9% and 11.7% over the past three and five years, respectively.
CMCSA’s adjusted net income increased 4.5% year-over-year to $4.22 billion in the fiscal third quarter (ended September 30, 2022). The company’s adjusted EBITDA increased 5.9% from the year-ago value to $9.48 billion, while its adjusted EPS increased 10.3% from the year-ago value to $0.96.
CMCSA’s EPS and revenue are expected to increase 2.8% and 0.3% year-over-year to $0.79 and $30.44 billion, respectively, in the fiscal fourth quarter (ending December 31, 2022). The company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
Shares of CMCSA have gained 11.1% over the past three months to close the last trading session at $34.62.
CMCSA’s POWR Ratings reflect its solid prospects. It has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Quality. Of the nine stocks in the Entertainment - TV & Internet Providers industry, it is ranked first. To see the other ratings of CMCSA for Growth, Value, Momentum, Stability, and Sentiment, click here.
Stocks to Avoid:
DISH Network Corporation (DISH)
DISH provides television entertainment and technology services through its two primary business segments: Pay-TV and Wireless. It also offers access to movies and television shows through TV or Internet-connected devices and mobile applications for authorized content, search program listings, and remotely controlling certain DVR features.
On November 7, the company announced the offering of $2 billion of its 11.75% Senior Secured Notes due 2027. This reflects the company’s debt obligations.
DISH’s total revenue for the third quarter ended September 30, 2022, decreased 7.9% year-over-year to $4.10 billion. The company’s operating income declined 40.5% year-over-year to $427.03 million, while its net income decreased 26% from the year-ago value to $412.23 million. Also, its EPS fell 26.1% year-over-year to $0.65.
In terms of forward EV/EBITDA, DISH is currently trading at 10.06x, 27.6% higher than the industry average of 7.89x.
Analysts expect DISH’s EPS and revenue for the fourth quarter ended December 31, 2022, to decrease 46.1% and 6.7% year-over-year to $0.47 and $4.15 billion, respectively. Over the past year, the stock has lost 58.9% to close the last trading session at $13.50.
DISH’s bleak fundamentals are reflected in its POWR Ratings. The stock has an overall rating of D, which equates to a Sell in our proprietary rating system.
It has an F grade for Quality and a D for Growth and Sentiment. Within the Entertainment - TV & Internet Providers industry, it is ranked last among the nine stocks. Click here to see the other ratings of DISH for Value, Momentum, and Stability.
WideOpenWest, Inc. (WOW)
WOW provides high-speed data, cable television, and digital telephony services to residential and business customers in the United States. It currently serves approximately 1.90 million homes and businesses and 532,900 customers in the states of Alabama, Florida, Georgia, Michigan, South Carolina, and Tennessee.
WOW’s total revenue came in at $173.70 million for the third quarter ended September 30, 2022, down 35.1% year-over-year. Its income from operations decreased 81.4% year-over-year to $9.90 million. Also, the company’s net income and EPS declined 99.9% and 99.8% year-over-year to $0.50 million and $0.01, respectively. In addition, its adjusted EBITDA fell 36.9% from the year-ago value to $68.50 million.
In terms of forward EV/Sales, WOW is currently trading at 2.06x, 13.3% higher than the industry average of 1.82x. Its forward EV/EBIT multiple of 35.04 is 140% higher than the industry average of 14.60. In addition, its forward Price/Cash Flow multiple of 13.26 is 52.6% higher than the industry average of 8.69x.
Street expects WOW’s revenue to decrease 8% year-over-year to $177.36 million in the fourth quarter ending December 31, 2022. Over the past year, the stock has lost 59.3% to close the last trading session at $8.75.
WOW’s POWR Ratings reflect its poor prospects. The stock has an overall D rating, equating to Sell in our POWR Ratings system. It has a D grade for Sentiment. Again, in the same industry, it is ranked #8.
Beyond what is stated above, we’ve also rated WOW for Growth, Value, Momentum, Stability, and Quality. Get all WOW ratings here.
CMCSA shares were trading at $35.06 per share on Thursday afternoon, up $0.44 (+1.27%). Year-to-date, CMCSA has declined -28.49%, versus a -17.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
1 Entertainment Stock to Hold Forever and 2 to Sell StockNews.com
