With the costs of the streaming wars on the rise, Wall Street is likely to spend much of the new year debating subscriber trends and what production budget news will mean. How about the stock winners and losers in 2022.
And the impact of the coronavirus pandemic, particularly the omicron variant, on businesses will also be a focus for analysts and investors assessing where to bet in the new year.
Below, The Hollywood Reporter looks at six recent upgrades by entertainment-media analysts and stock options for the coming year.
Tim Nollen, Macquarie
Option: Discover and Disney.
Why: The analyst upgraded Discovery in November with a $40 share price target, citing “strong growth in Discovery+, an upcoming transformative WarnerMedia merger, and a cheap valuation.” And he noted in a December note: “We believe that next year, Discovery stock will be a bright spot in the media industry based on consistent results and arguments.”
Nollen also likes Disney, though he used the December report to cut his price target from $10 to $185. “Our bullish thesis on Disney stock focuses on strong direct-to-consumer subscriber growth and a cyclical recovery in parks and theaters,” Nollen detailed. “While the macro environment with new COVID variants has fueled a recovery at parks and theatrical businesses, and recent Disney+ subscriber growth has been mild, we are still fundamentally optimistic about the source of goods.” His conclusion: “Disney remains the long-term winner of the streaming wars.”
Tuna Amobi, Research CFRA
Option: Netflix, Disney, Comcast, Network AMC, Lionsgate and Living country.
Why: “Over the next year, we think some of the potential catalysts for the performance of media and entertainment stocks include the continued reopening of the global economy – depending on whether omicrons are contained or other COVID-19 variants as a potential risk factor, key milestones on continued execution of the global streaming strategy – subscriber/audience growth, international penetration, stream free money and/or profitable trajectory, etc., major M&A announcements or a related wave of activity, including several potential sales candidates and further release of consumer demand for physical Live sports and pent-up out-of-home entertainment. ”
Steven Cahall, Wells Fargo
Among his options: Imax
Why: “We are bullish on 2022,” the analyst wrote in a December 16 report. “We think exhibitors’ mindsets have improved despite omicrons, the appetite of consumers. Use for high-end theater continues to be proven, and the content medium is unmatched. We think the Imax box office has grown, as Imax’s domestic box office percentages tend to be higher than historically based on the ‘power vehicles’ of released films. His conclusion: “We think this could be one of the best SME media of 2022 with the next catalyst likely to be a positive correction to the estimates. medium-term on the outlook for installations in Q4 2021 results.”
Michael Pachter, Wedbush Securities
Pick: Zynga
Why: “Zynga is a lot,” the analyst said for his favorite entertainment stock for 2022. After all, it’s “trading at pre-COVID levels with much higher revenues and profits than they were in early 2020 and “Stocks are trading at bottom multiples with earnings growth, so that should double by 2022.”
Eric Handler, MKM . Partner
Pick: Zynga
Why: “We have a positive view of the video game industry as we head into 2022 as secular trends remain positive, fundamentals are compelling and valuations are heading towards the bottom of the range. microtransactions,” the analyst explained in a mid-December report. “Zynga is well-established for double-digit booking growth in 2022 driven by new game releases and contributions from developers. recent acquisitions. Additionally, we see a compelling free cash flow story that will build over the next 24 months as the company nears its final M&A-related payout in the first quarter of 2022.”
Benjamin Swinburne, Morgan Stanley
Option: Fox Corp., Efforts, Spotify and current favorite Warner Music Group.
Why: “Growths in streaming, advertising, and live entertainment will drive strong revenue growth across media and entertainment in year 22,” the analyst wrote in last year’s preview. “Our top ideas for next year could navigate rising content costs and translate (revenue growth into earnings growth.” It is estimated that the global audio industry will grow rapidly. rapidly in the coming years, “fueled by streaming and a return to normal, especially live events,” he said, “picking up two audio entertainment winners.” This provides offers an attractive setup for both owners of audio content (Warner Music) and distributors of that content (Spotify), both of which will benefit from the secular growth landscape,” explains Swinburne.
