Are these the best entertainment stocks to watch?
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Entertainment stocks have seen both rises and falls since 2020, as recreation turned virtual amid worldwide lockdowns. We’ve picked some of the best entertainment stocks to watch in 2021.
- Netflix Inc
- Walt Disney Co
- Flutter Entertainment
- Activision Blizzard
- Comcast Corp
Entertainment stocks: what you need to know about the sector
Entertainment has had one of the most varied stories of the Covid-19 pandemic. While companies specialising in live entertainment saw profits plummet amid worldwide lockdowns – even as other entertainment providers, like streaming services and gaming companies, reported huge gains. All this was indicative of the changed nature of entertainment in a pandemic-disrupted world.
However, with many countries’ lockdowns having ended and vaccination rollouts well underway, it remains to be seen whether entertainment stocks will have a different third act in months to come.
What are the different types of entertainment stocks?
- Live entertainment and venue entertainment companies, including theme parks and cinema chains
- Multimedia companies such as streaming services, film studios, broadcasting and television
- Music industry companies
- Gaming companies, including mobile, online, PC and console games
- Gambling companies, like physical casinos and their online variants
5 entertainment and media stocks to watch
Netflix
The year 2020 was arguably the year of Netflix, with the world turning to online streaming entertainment as life in lockdown took hold. The streaming service boasts over 200 million customers around the globe– a record 37 million signed up in 2020 alone. Accordingly, the entertainment giant’s stock skyrocketed more than 250% in 2020 and reported year-end profits of $4.6 billion - a 76% increase - and a 24% rise in revenue to $25 billion for 2020.
The future looks bright for Netflix, with 2022 slated to be its first free-cash-flow positive year – a fact that bodes well for the Netflix business model (which some have critiqued for its debt-heavy emphasis on original content creation) in future. So much so, that the streaming service has announced it is considering share buybacks, as well as plans to pay off the considerable debt it has incurred, which matures in 2021.
Walt Disney
Few companies have had a more nuanced 2020 and quarter one (Q1) 2021 than Disney. The company’s theme parks, resorts and cruise line took an understandable knock in the pandemic and the company reported an income of just $1.74 million in 2020, compared to nearly $14 million in 2019.
Despite this, February saw Disney stocks reaching an all-time high of $183.65 when the company announced its flagship Disneyland park would be reopening on 30 April 2021. Disney+ also saw significant gains at the same time, amassing over 90 million members since its debut towards the end of 2019.
The service has several notable releases planned, most notably Marvel Studios’s Black Widow. Investors should also remember that Disney has other screen giants under its belt, such as Hulu and Twenty-First Century Fox.
Flutter Entertainment
Flutter Entertainment is listed on the London Stock Exchange (LSE) and is a FTSE 100 company specialising in sports betting and gaming. This includes online casino operations, online racing betting such as the TVG Network, and mega successful PokerStars.
The entertainment company had an eventful 2020, largely due to a merger with Canadian gambling conglomerate The Stars Group. Far from the carnage of some entertainment companies’ stocks during Covid-19, Flutter Entertainment reported a 28% increase in net revenue for 2020 (equal to around £5.3 billion) and an 18% increase in operating profits, from £281 million in 2019 to £676 million in 2020.
Flutter Entertainment has also experienced wins in 2021, with its stock climbing nearly 6% on 15 March when it announced potential for a partial United States initial public offering (IPO) listing for American gambling company FanDuel in the near future. As of December 2020, Flutter Entertainment owns a 95% stake in FanDuel.
Activision Blizzard
Gaming company Activision Blizzard boasts some of the most famous and profitable video games in the world, including World of Warcraft, Call of Duty and mobile hit Candy Crush.
The company saw great gains in 2020, as worldwide lockdowns turned the masses into gamers. In fact, Blizzard’s 2020 results were so successful that they caused stock prices to climb as high as $100 the day they were released. Among other good news, the results reported a net revenue of $8.09 billion - an increase of $1.6 billion.
In late March, the company’s stock price increased again after the announcement that it was set to beat its 2021 Q1 outlook, and following the appointment of Armin Zerza as chief financial officer. However, it’s worth noting that Activision Blizzard have come under fire in the past for allegedly overworking staff in 2020, and for mass layoffs in 2021.
Comcast
Comcast is one of the biggest television and film behemoths in the world, with companies such as DreamWorks, Sky Group, NBCUniversal and AT&T Broadband. A pandemic disruption story, the company has pivoted hard into digital service offerings in the wake of falling traditional TV subscription figures.
Comcast’s revenues fell almost 5% from $10.89 billion in 2019 to $10.35 billion in 2020. Net income fell even further, a 19% drop from just over $13 billion in 2019 to $10.53 billion in 2020. That said, Comcast still managed to pay a Q4 2020 earnings per share (EPS) of $0.56, and generate a free cash flow of over $13 billion.
While traditional streams of revenue such as TV subscriptions waned, Comcast nevertheless tuned into the demand for high-speed internet, advertising and wireless services. Wireless revenue increased 35.8%, advertising revenue increased 33.8%, high-speed internet revenue increased 12.7% and cable communications increased 6.3% in Q4 2020 alone.
How to trade entertainment and media stocks
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Trading and investing are similar terms that are sometimes used interchangeably, but there are subtle differences between them:
Trading lets you take a speculative position on a stock, exchange traded fund (ETF) or other market without taking direct ownership. Instead, you’ll be trading on whether the asset’s price will rise (known as going long) or fall (known as going short) with derivatives like CFDs. Investing lets you take direct ownership of a stock, ETF or other market. With us, you can only trade via CFDs.
What’s the entertainment industry outlook?
- Outlooks remain sunny for companies such as Netflix, which were able to capitalise on a self-isolated world’s need for at-home entertainment
- It’s possible that more traditional forms of entertainment may once again rally if or when countries around the world begin to steadily ease their national lockdowns
- Covid-19 appears to have changed the way the world entertains itself, maybe forever. As a result, there are interesting growth prospects for the companies that are willing to pivot to the ‘new normal’
Entertainment shares summed up
- Entertainment has had a varied year, with many entertainment stocks either reeling or soaring in the wake of Covid-19 disruption
- Some entertainment and media companies, most notably digital and streaming names, saw significant profits in 2020
There is potential for both great gains or big losses in future for entertainment stocks, as the nature of recreation shifts in a post-pandemic world.
Footnote
* As awarded at ADVFN International Financial Awards 2022
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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