Trouble in Tinseltown: 3 Entertainment Stocks to Sell Before the Curtain Falls
By now, you’ve likely heard about ongoing strikes affecting entertainment stocks. After actors joined the writer picket lines, most entertainment stocks fell sharply. The fallout was broad, affecting legacy media franchises and streaming platforms alike.
But continuing strikes aren’t all that’s suppressing entertainment stocks, and the future is bleak for legacy companies reliant on cable television. As it loses popularity, companies seeing reduced viewership and resulting ad revenue are cutting costs in a way that will alienate employees further.
For example, one CBS show slashed actor budgets. At the same time, instead of paying for actors for an entire season, CBS changed their contract to a per-episode basis, with CBS reserving the right to axe characters they can no longer afford.
The downward trend isn’t unique to CBS, though. These three entertainment stocks are seeing reduced revenue across the board, each with unique problems. Ultimately, now is the time to sell these entertainment stocks before the curtain finally falls.
Paramount (NASDAQ:PARA) is down nearly 50% from its 2023 high and has further room to drop. The company’s revenue has fallen 2% since last year, and most don’t expect a revival anytime soon as ad sales continue sluggish. At the same time, Paramount+, the company’s streaming service, remain lagging behind peers like Netflix (NASDAQ:NFLX).
This week, PARA reported a tepid subscriber growth rate, ending the quarter at around 65 million total subscribers. By comparison, Netflix has almost 240 million subscribers and continues capturing market share despite unpopular changes to its cost structure.
Paramount, in an effort to reduce costs, is also selling off properties in a fire sale. On August 7th, the company announced the sale of its book publishing arm, Simon & Schuster, to KKR & CO (NYSE:KKR) for $1.62 billion. While this gives the company a much-needed cash infusion, and arguably lets them focus on core media segments, any company selling valuable assets to investment firms isn’t usually financially stable.
Warner Bros Discovery (WBD)
And like Paramount, its streaming service won’t be a saving grace. WBD’s streaming platform, Max (formerly HBO Max), saw a 1.8 million subscriber loss this quarter, ending the period with about 96 million total users.
Lukewarm executive comments on the matter don’t restore confidence, either.
“While we have seen some expected subscriber disruption, we have experienced lower than expected churn throughout this process,” said CEO David Zaslav when addressing subscriber declines. In other words, it could be worse, and ultimately, this entertainment stock’s performance has further room to fall.
Comcast (NASDAQ:CMCSA) benefits more than other entertainment stocks from diversified revenue streams. Although Comcast’s outlook is better than others in the sector, company management still has rocky waters ahead.
In reality, Comcast’s entertainment arms, including NBC, are peripheral to its core broadband offerings. Comcast saw revenue per broadband customer jump 4.5% this quarter, primarily due to price increases rather than expanding its market share. At the same time, competitors like Verizon (NYSE:VZ) are snatching up internet subscribers disinterested in the bundled cable packages Comcast prioritizes.
Comcast’s streaming service, Peacock, is in the same position as others we’ve looked at in this article. Analysts claim Comcast is over-relying on the streaming platform to compensate for legacy television losses. And, ultimately, analysts made the right call. The Comcast president projected a $3 billion loss on their Peacock investment in January. The company is well on its way to hitting that substantial stat.
In a different environment, with more time, Comcast’s Peacock bet may have paid off. In a tight economic landscape amid cost-cutting and strikes today, Peacock likely won’t come to Comcast’s rescue.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.