The entertainment industry shows promising prospects with technological advances and enhanced user experiences. Integration of emerging technology is boosting long-term prospects.
Therefore, adding fundamentally strong entertainment stocks, The Walt Disney Company (DIS) and LiveOne, Inc. (LVO), to one’s watchlist could be wise.
Before diving deeper into their fundamentals, let’s discuss what’s shaping the prospects of the entertainment industry.
The entertainment industry is expanding due to the popularity of streaming services, higher demand for live events, and ongoing technological advancements. The industry is evolving with digital tools and offering cost-effective solutions to meet consumer preferences.
Despite a 15% increase in U.S. movie ticket prices from pre-pandemic levels in 2023, going to the cinema remains reasonably affordable. A Statista report predicts total revenue in the entertainment market will grow at a 10.5% CAGR, reaching $48.76 billion by 2027.
The box office sales in 2023 exceeded last year’s figures by $1 billion, totaling an impressive $5.8 billion until July 30. According to a report by Markets N Research, the global movie theater market is expected to grow at a CAGR of 4.5% and reach $92.40 billion by 2030.
Furthermore, advancements in technology are transforming film production and distribution. Tools like machine learning and natural language processing enhance content and offer personalized recommendations. The generative AI market in media and entertainment is projected to reach $12.08 billion by 2032, growing at a 26.7% CAGR.
Considering these conducive trends, let’s take a look at the fundamentals of the two Entertainment - Media Producers stocks.
Stock #2: LiveOne, Inc. (LVO)
LVO engages in acquiring, distributing, and monetizing live music, internet radio, podcasting/vodcasting, and music-related streaming and video content. It operates LiveXLive, a live music streaming platform; PodcastOne, a podcasting platform; and Slacker, an integrated membership and advertising streaming music service. Additionally, it produces original music-related content.
On November 28, 2023, LVO’s PodcastOne partnered with SourceAudio’s PodcastMusic.com to leverage advanced AI. This collaboration offers podcasters tools to effortlessly discover and select from 1.2 million licensed songs and sound effects, enhancing PodcastOne's show quality. The AI enables precise identification and searching for customized audio, providing listeners with an immersive experience.
In terms of the trailing-12-month asset turnover ratio, LVO’s 1.66x is 222.3% higher than the 0.52x industry average. On the other hand, its 29.08% trailing-12-month gross profit margin is 40.5% lower than the industry average of 48.90%. Additionally, the stock’s 2.24% trailing-12-month Capex/Sales is 45.1% lower than the industry average of 4.09%.
LVO’s revenue for the fiscal second quarter ended September 30, 2023, increased 21.2% year-over-year to $28.53 billion. Its adjusted EBITDA for the period came in at $2.79 billion. However, the company’s net loss and loss per share widened 91.2% and 75% over the prior-year quarter to $6.52 billion and $0.07, respectively.
Analysts expect LVO’s EPS for the quarter ending December 31, 2023, to increase 16.1% year-over-year to $31.70 million. However, its EPS for the same quarter is expected to remain negative. The stock has gained 64.7% year-to-date to close the last trading session at $1.06.
LVO’s bleak fundamentals are reflected in its POWR Ratings. It has an overall rating of C, equating to a Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a C grade for Growth, Value, Momentum, Stability, and Sentiment. Within the Entertainment - Media Producers industry, it is ranked #8 out of 11. In total, we rate LVO on eight different levels. Beyond what we stated above, we have also given LVO a grade for Quality. Get all the LVO ratings here.
Stock #2: The Walt Disney Company (DIS)
DIS operates as an entertainment company worldwide. The company engages in film and episodic television content production and distribution activities. It operates through two segments: Disney Media and Entertainment Distribution; and Disney Parks, Experiences, and Products.
On November 1, 2023, DIS announced the acquisition of Comcast Corp.’s 33% stake in Hulu, LLC, following Comcast’s exercise of its put/call right. The deal, valued at approximately $8.61 billion, aligns with DIS’ streaming objectives.
In terms of the trailing-12-month EBIT margin, DIS’ 10.50% is 33.5% higher than the 7.87% industry average. Likewise, its 5.59% trailing-12-month Capex/Sales is 36.8% higher than the industry average of 4.09%. However, the stock’s 2.42% trailing-12-month Return on Common Equity is 28.9% lower than the industry average of 3.41%.
For the fourth quarter that ended September 30, 2023, DIS’ revenues rose 5.4% year-over-year to $21.24 billion. Its total segment operating income rose 86.3% year-over-year to $2.98 billion. Moreover, its attributable net income and EPS came in at $264 million and $0.14, up 63% and 55.6% over the prior-year quarter, respectively.
However, as of September 30, 2023, DIS’s total liabilities and equity stood at $205.58 billion compared to $203.63 billion as of October 1, 2022.
Analysts expect DIS’ EPS and revenue for the quarter ending December 31, 2024, to increase 9.3% and 1.8% year-over-year to $1.08 and 23.93 billion, respectively. It surpassed the Street EPS estimates in three of the trailing quarters. Over the past nine months, the stock has declined 6.1% to close the last trading session at $92.58.
DIS’ uncertain outlook justifies its overall rating of C, which translates to Neutral in our proprietary POWR Ratings system.
It is ranked #7 out of 11 stocks in the same industry. It has a C grade for Stability, Sentiment, and Quality. Click here to see DIS’ Growth, Value, and Momentum ratings.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
DIS shares fell $0.75 (-0.81%) in premarket trading Monday. Year-to-date, DIS has gained 5.84%, versus a 20.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
Walt Disney (DIS) and LiveOne (LVO) – Should You Buy, Hold or Sell in December? StockNews.com
