Are These The Best Entertainment Stocks To Buy Right Now?
Like many sectors of the market, entertainment stocks have been badly affected by the COVID-19. The coronavirus pandemic not only affects the way we work and learn but also the way we spend our leisure time. Even the way we watch blockbuster movies also saw big changes this year. Recall that Mulan made its debut through Disney+, a bold move by the entertainment powerhouse. Certainly, this allows consumers to enjoy the movies at the comfort of their home and benefits streaming providers. On the other hand, movie theater companies have been struggling since the pandemic started.
On December 3, AT&T’s (T Stock Report) Warner Bros’ decision to send all 17 of its 2021 movies to streaming on the same day as its planned theatrical release is sending a seismic shock to the entire movie industry. It doesn’t take an expert to see how such news will send top entertainment stocks like AMC Holdings (AMC Stock Report) and IMAX Corporation (IMAX Stock Report) sliding.
“No one wants films back on the big screen more than we do,” says WarnerMedia’s Ann Sarnoff. “We know new content is the lifeblood of theatrical exhibition, but we have to balance this with the reality that most theaters in the U.S. will likely operate at reduced capacity throughout 2021.”
Could Streaming Be The New Normal Even In The Post-Pandemic World?
With the rise of video streaming, interest in going to a theater to watch a movie have plummeted except for the blockbusters. Many saw this coming, and have been bidding for the best streaming stocks we can find in the stock market today. While some continue to bid up the streaming stocks, there are also a number of investors scooping up the heavily discounted movie theater stocks.
Sure, the news last week is having a major impact on the movie theaters. Nevertheless, I personally do believe that now is a great time to buy these stocks at a huge discount. That’s assuming they have enough liquidity to last until widespread vaccination against the novel coronavirus. That will help bring moviegoers back into the theaters. But to many, this is most probably a very risky thing to do. For instance, AMC says that it might go bankrupt if investors don’t buy its stocks in its stock offering. Hence, investors might be better off avoiding these risky stocks at all costs. But of course, many still like to invest in entertainment stocks instead. With that in mind, do you have these top entertainment stocks on your watchlist this week?
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Top Entertainment Stocks To Buy [Or Avoid] Now: Netflix
First, up the list, it’s imperative to note that the tailwind Netflix (NFLX Stock Report) has gotten from the pandemic is real. There is no question that demand for Netflix is on the rise as there is now a greater need for at-home entertainment during the pandemic. The online streaming entertainment giant has seen its share price risen by 51% year-to-date. The company also boasts a market cap of $220 billion and is the largest entertainment/media company by market capitalization. You should note that Netflix had only become a household name in the last 10 years, so this is an impressive feat. This is a given seeing how Netflix has reported a 23.3% growth of its global streaming paid memberships.
Netflix stock has been trading sideways in the past month because there are concerns that the positive developments from the vaccine front will weigh down the company’s balance sheet materially. I’m not sure about you, but I do think that fears of vaccines bringing the streaming industry down is a little… overblown. After all, the end of the pandemic doesn’t mean that viewers will start canceling their subscriptions in droves.
Being a pioneer of online streaming services, the company has had a competitive edge over its peers. Netflix takes an active role as both producer and distributor for both its film and television series. By offering its “Netflix Originals” content, users have a wide array of dramas, series, and documentaries to choose from. With the pace of its subscriber’s growth, you could expect the company to capitalize on its large user base.
Top Entertainment Stocks To Buy [Or Avoid] Now: Roku
Another entertainment stock worth watching is Roku (ROKU Stock Report). ROKU stock has been on an absolute tear in the stock market this year. The company has an advertising business along with hardware and software that are licensed to other companies. Roku’s share prices have climbed over 40% in November alone after reporting strong third-quarter results.
Looking at Roku’s third-quarter earnings, it’s fair to say that the company has been firing on all cylinders. Roku reported a 43% year-over-year active account growth rate. It also reported that total net revenue increased by 73% year-over-year to $452 million. In large part, that came from an 81% year-over-year increase in platform revenue to $319 million.
Aside from another strong quarter from ROKU, the coronavirus is still very much present causing more people to stay at home. We can assume that more people staying at home means more people spending time streaming. As we’re approaching Christmas, is ROKU stock on your list of the top entertainment stocks to buy in the stock market?
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Top Entertainment Stocks To Buy [Or Avoid] Now: Walt Disney
Walt Disney (DIS Stock Report) is another entertainment stock worth a closer look. Disney has seen steady growth in the months since the COVID-19 pandemic hit. With social distancing restrictions in place, the company lost several sources of revenue. Two notable ones would be its box office revenue from movie releases and Disneyland theme park/resort revenue. But that’s not the main point. But rather it’s knockout success with its Disney+. The entirely new segment just 13 months into the market is what is driving its stock price back to its pre-pandemic levels. That’s while its theme parks/resorts are operating at reduced capacity.
“Given the incredible success of Disney+ and our plans to accelerate our direct-to-consumer business, we are strategically positioning our company to more effectively support our growth strategy and increase shareholder value.” CEO Bob Chapek
Of course, now that a vaccine is in sight, Disney’s theme parks could see a return in traffic. Similarly, its cruise lines could be ready to sail again. In the previous quarter, Disney still reported a loss. The share price has now broken even year to date. With a growing streaming business and recovery in other segments, could this be a great opportunity to buy DIS stock?