The entertainment sector has experienced reduced consumer spending amidst macroeconomic issues. Nevertheless, the industry seems to be poised for substantial growth in the foreseeable future, thanks to the swift pace of urbanization and the escalating desire for immersive entertainment experiences.
However, while quality entertainment stock Endeavor Group Holdings, Inc. (EDR) might be a solid buy now, I think Live Nation Entertainment, Inc. (LYV) might be best kept on hold, and fuboTV Inc. (FUBO) might be best avoided, given its grim fundamentals.
Rapid urbanization and significant growth in the travel and tourism industry are key factors creating a positive outlook for the Amusement Park market. The global Amusement Parks market is expected to reach $68.80 billion by 2028 at a CAGR of 4.91%.
Moreover, other factors, including rising disposable incomes, consumer expenditure capacities on entertainment, increasing investments in themed amusement parks, and the development of 4D rides and giant roller coasters and rides, are expected to drive the market further.
Moreover, the growing demand for virtual and augmented reality (VR/AR) entertainment experiences is another recent trend in the smart entertainment systems industry. The global smart entertainment systems market is expected to reach $479.57 billion by 2033, expanding at 5.8% CAGR.
However, with the cost of living rising, many consumers are trying to cut back on spending. Younger people are feeling especially stretched. This is expected to be seen throughout 2023. It could result in consumers canceling some subscription services to save money, negatively affecting the entertainment industry.
Take a look at the stocks mentioned above:
Stock to Buy:
Endeavor Group Holdings, Inc. (EDR)
EDR is a global sports and entertainment company. It owns and operates premium sports properties, including the Ultimate Fighting Championship (UFC). It also produces and distributes sports and entertainment content. The company operates through three segments, Owned Sports Properties; Events, Experiences & Rights; and Representation.
EDR’s trailing-12-month EBIT margin of 10.63% is 24.6% higher than the industry average of 8.53%. Its trailing-12-month gross profit margin of 61.13% is 23.8% higher than the industry average of 49.37%.
EDR’s revenue increased 9.4% year-over-year for the first quarter that ended June 30, 2023, to $1.44 billion. Also, its net income and earnings per share of Class A common stock increased significantly year-over-year to $666.54 million and $1.29.
The consensus revenue estimate of $5.62 billion for the year ending December 2023 represents a 6.6% increase year-over-year. Its EPS is expected to grow 10.3% to $1.16 for the same year.
EDR’s shares have gained 14% over the past year to close the last trading session at $25.03.
EDR’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating 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.
EDR also has a B for Growth and Momentum. It is ranked first among 14 stocks in the Entertainment – Sports & Theme Parks industry.
Click here for the additional POWR Ratings for Value, Stability, Quality, and Sentiment for EDR.
Stock to Hold:
Live Nation Entertainment, Inc. (LYV)
LYV operates as a live entertainment company. It operates through Concerts; Ticketing; and Sponsorship & Advertising segments.
LYV’s trailing-12-month levered FCF margin of 8.40% is 10.2% higher than the 7.62% industry average. However, its 25.64% trailing-12-month gross profit margin is 48.1% lower than the 49.37% industry average.
For the second quarter ended June 30, 2023, LYV’s revenues rose 27% year-over-year to $5.63 billion. Its net income rose 45.1% year-over-year to $331.34 million. Net income per common share available to common stockholders of LYV rose 54.5% year-over-year to $1.02. However, its net income attributable to noncontrolling interests narrowed 7.2% year-over-year to $37.66 million.
Street expects LYV’s EPS for the third quarter ending September 30, 2023, to decline 10.4% year-over-year to $1.25. On the other hand, its revenue for the same quarter is expected to increase 12.5% year-over-year to $6.92 billion. It surpassed the revenue estimates in each of the trailing four quarters, which is impressive.
Over the past nine months, the stock has gained 18.4% and declined 9.3% over the past year to close the last trading session at $86.30.
The stock has an overall C rating, equating to a Neutral in our proprietary rating system.
It has a C grade for Growth, Value, and Quality. It is ranked #5 in the same industry.
To access additional ratings for LYV’s Momentum, Stability, and Sentiment, click here.
Stock to Sell:
fuboTV Inc. (FUBO)
FUBO operates a live TV streaming platform for live sports, news, and entertainment content in the United States and internationally.
FUBO’s trailing-12-month CAPEX/Sales of 0.04% is 99.1% lower than the industry average of 4.02% and its trailing-12-month gross profit margin of 1.96% is 96% lower than the industry average of 49.37%.
FUBO’s subscription revenue came in at $288.99 million and total revenue came in at $303.91 million. Its net loss from continuing operations came in at $54.21 million and adjusted EBITDA came in at negative $30.55 million.
FUBO’s EPS is expected to come in at $0.26 for the fiscal third quarter ending September 2023. Its revenue is expected to be $284.33 million for the same quarter.
Over the past nine months, the stock has lost 29.8% to close the last trading session at $2.40.
FUBO’s grim prospects are reflected in its POWR Ratings. The stock has an overall D rating, translating to a Sell in our POWR Ratings system.
It also has an F grade for Stability and a D grade for Momentum and Quality. It is ranked #11 in the same industry.
Beyond what is stated above, we’ve also rated FUBO for Value, Sentiment, and Growth. Get all FUBO ratings here.
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EDR shares were trading at $24.58 per share on Thursday morning, down $0.45 (-1.80%). Year-to-date, EDR has gained 9.05%, versus a 18.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
Buy, Hold, or Sell These 3 Entertainment Stocks StockNews.com
