If you really want to get meta about entertainment stocks, you can say they’ve provided some mighty fine diversion, in and of themselves.
You want a disaster epic? Try the AOL/TimeWarner merger of 2000. Comeback story of 2020? Live Nation Entertainment (NYSE:LYV) has somehow clawed back to year-over-year share price parity despite a disastrous pandemic run for concerts and entertainment venues.
And as for the tectonic shifts reshaping all media, you could take the view of technologists. Many contend that the novel coronavirus pandemic compressed a decade’s worth of growth and disruption into nine months. But if change remains the one constant, then investors must negotiate it like a tightrope walk because — surprise! — media and entertainment create an echo chamber for the hype and hysteria that surround it.
For entertainment stocks, this has long been the case. In fact, the digital realm has seen drastic turnover since 2000. Remember CDs trouncing vinyl? Then Napster? Myspace? Downloads trouncing CDs? Then vinyl coming back? And streaming making it all seem kind of like a game of existential musical chairs? At least it didn’t all happen at once.
Catching the wave of change just right informs this list of best entertainment stocks to buy on the new media landscape. Here I’m striking a balance between recent disruptors and some time-honored names spanning many generations with these eight entertainment stocks.
- Amazon (NASDAQ:AMZN)
- Apple (NASDAQ:AAPL)
- Netflix (NASDAQ:NFLX)
- Twitter (NYSE:TWTR)
- Warner Music Group (NASDAQ:WMG)
- Disney (NYSE:DIS)
- Nintendo (OTCMKTS:NTDOY)
- Microsoft (NASDAQ:MSFT)
So don’t touch that dial. Don’t yank your router. Don’t do whatever it is you might otherwise do to pre-empt what promises to be a great big bodacious dose of first-class entertainment. It’s coming your way. Ready? Of course you are, rock star! And now, on with the show.
I suppose Jeff Bezos is rich enough to buy the entire sector of entertainment stocks if he wants. Short of that, AMZN stock has come to represent a play in entertainment as well as e-commerce. And given Amazon’s astounding financial muscle — it’s valued at $1.59 trillion — it can stay in the game as long as cares to and aim a cash firehose at any venture faster than it can fail.
Not that this is necessary in the slightest. Amazon Prime Video just passed its 14-year anniversary in September. And as cable TV continues its lurch toward extinction, Amazon has added the likes of pro baseball’s MLB.TV and produced its own run of popular series such as “Homecoming” and “Tom Clancy’s Jack Ryan.”
Many contenders in the streaming sweepstakes won’t make it past 2025. But Amazon will, even as the company continues to grow at an astonishing pace. Year over year, Amazon stock is up 72%.
Not to be outdone in market capitalization, Apple is worth a mere $2.24 trillion. That number with the 13 digits surpasses the GDP of Italy, Brazil, Canada and the Russian Federation. (How many MacBook Pros the Russians hacked in 2020 is hard to say.)
To be sure, its device innovation days ended with the passing of co-founder Steve Jobs. But Apple forever changed how the world consumed media, music and video in 2007 with the advent of the iPhone. And content-wise, new wrinkles have just emerged that make AAPL stock a must-have among entertainment stocks.
In November 2019 the company debuted its video streaming service Apple TV+, a move that led The Ringer to question whether it could succeed “where every other tech company not named Netflix has mostly failed.”
It’s far too early to pass judgement after just 13 months but suffice to say, AAPL stock is up 154% since the launch. And with more money than Russia to burn, Apple TV+ could even woo Vladimir Putin and Donald Trump to co-star in a reboot of those 1950s Hope-Crosby buddy comedies.
Apple has also moved into gaming with its Apple Arcade service, which offers users access to more than 100 games from its App Store for $4.99 per month. “Making Money With AAPL Stock” is not one of those featured amusements — at least not yet — but these days the real-life version is easy enough to play.
It’s easy to forget that Netflix has already weathered one huge of wave of changing content — and in fact instigated it. History was made when Netflix moved away from shipping rental DVDs back and forth to consumers in those handy little envelopes and into the world of video streaming. Whatever ambitions Apple and Amazon have, they must contend with Netflix now and for the foreseeable future.
NFLX stock testifies to the company’s ability to not only stream first-class content but create it as well. In 10 years, the stock has made a mind-boggling moneybag leap from $25 per share to $520. If you bought 100 shares for $2,500, they’d be worth $51,400 today. As they say in Hollywood, “THAT’s entertainment.”
The pandemic proved a boon for those holding NFLX stock. People forced to shelter in place regaled themselves with series such as “The Crown” and “Tiger King,” blockbusters that reasserted the strong suit Netflix has for growing its own hot media properties. And as with many habits consumers acquired during the pandemic, watching Netflix will prove a tough one to kick. The U.S. subscriber base has jumped year over year from 60.6 million to 73.1 million, and you can bet many of the new viewers are here to stay.
While many have joked about what will happen to Twitter once Donald Trump leaves the White House, the company’s place in social media history is more than assured.
And regardless of whether the president was good or bad for the brand, 2020 has proven excellent to owners of TWTR stock: It’s up 67%. As entertainments stocks go, Twitter helped to usher in the Age of the Influencer.
Twitter owes its staying power to the ubiquity it’s gained people’s lives. It may not rank among the most ambitious or paradigm-breaking social media platforms, but it ranks as a go-to destination for real-time discourse of every kind.
It has 330 million monthly active users who post 500 million tweets every single day. Yet Twitter also has its share of bots (estimated at 48 million three years ago) and its took a reputation beating this year for being slow to crack down on hate speech and misinformation.
TWTR stock is a hold right now based on analyst consensus but the company has met or beaten earnings forecasts in three of the past four quarters, each time turning a profit. Wall Street might still be spooked by a disastrous second quarter when the company reported losses of $1.39 per share after forecasts had called for it to break even.
Still, this is one media company that won’t go away and analysts project positive earnings per share over the next two quarterly reports.
Warner Music Group (WMG)
If your smitten teen ever wanted to own a piece of singer-songwriter Ed Sheeran, here’s the way to do it. Warner Music Group, which has roots dating to the Roaring Twenties, roared back as a publicly traded company for just the second time in its history in June.
On the surface, buying stock in a company with ties to the old-school music business and the major label system might sound like insanity. But for those who chose to cue up the needle, it’s worked out well.
WMG stock has jumped 24% since trading began, with most of the action taking place in the last two months. There are two ways to look at this. First, Warner Music has a deep catalog that includes Atlantic and Elektra records, all three part of the former WEA conglomerate. Second, the company delivered double-digit revenue growth in digital for its fiscal fourth quarter 2020 and the full fiscal year despite complications caused by the pandemic. Few entertainment stocks of this type have fared as well.
Looking ahead, WMG stock stands to benefit from the company’s musical forays into gaming, social media and in-home fitness. Meanwhile, six of 13 analyst firms call it a buy, resulting in a consensus rating of overweight. Forecasts also call positive earnings per share in the next two quarters.
The House of the Mouse has had a rough go of it this year with the novel coronavirus wreaking havoc on its theme park business. But the one bright spot of 2020 had more luminescence than the fireworks shooting over Cinderella’s castle: the runaway success of its Disney Plus streaming service.
According to The Washington Post, Disney Plus now has 73 million global subscribers, making it “a clear favorite in the streaming wars among any service not named Netflix.” (Sounds familiar, eh?) Meanwhile, DIS stock has recovered from its March 20 Covid-19 crash by gaining 99%.
If Disney’s theme park business doesn’t come back, rest assured that the whole rest of the travel and resort business is in serious trouble. Assuming some return to normalcy in 2021 along with the continued ascent of Disney Plus, expect DIS stock to soar. It may be one of the best entertainment stock plays among larger companies in 2021.
Japanese video game trendsetter Nintendo already had lots going for it with the release of its Switch console in 2017. Fast forward to 2020 and those who hadn’t discovered the platform, or had barely experienced it, had all the time they needed to take a deep dive as they stayed at home. Or worked at home. After all, it’s easier to play “Legend of Zelda” when your boss isn’t around to watch.
NTDOY stock gained more than 60% in 2020 and for the most part it was one elegant climb. In fact, I’d call it enough to reassure me that the company’s good fortunes can’t be totally attributed to lifestyle changes wrought by Covid-19. For starters, the Switch was already a hit and a disruptor. This first-ever hand-held console that doubled as an in-home unit has now sold more than 68 million consoles. The company shipped 6.86 million between July and September alone.
What to do for an encore? Though it’s not officially confirmed, the gaming world is abuzz with talk of a major Switch upgrade in early 2021 as reported in several media outlets, including Bloomberg. Imagine all the newly minted gamers lining up to take a crack at a new console. Now, imagine getting in on NTDOY stock before that happens. As entertainment stocks go, this is better than hitching a ride on Mario’s Kart.
Microsoft has had some well-publicized failures over the years, from the Windows Phone to the Bing search engine. Yet for all those who may have laughed when Microsoft got into gaming with the Xbox in 2001, you can rest assured that they’ve eaten their words times seven. That’s about how much MSFT stock has multiplied in value since that first console rocked the gaming world.
Though Microsoft is of course much more than a gaming company, it has a significant portion of its DNA wrapped up in the world of entertainment stocks. Xbox represents a runaway success that will celebrate its 20th anniversary next November. Meanwhile, the cloud-based service Xbox Game Pass now has more than 15 million subscribers.
Investors in MSFT stock who applaud the company’s efforts in cloud computing may not know that in September it announced it would acquire ZeniMax Media for $7.5 billion in cash. ZeniMax is the parent company of Bethesda Softworks, one of the world’s largest privately held game developers and publishers. Microsoft framed the purchase as part of its effort to lead the charge “from a device-centric era to a player-centric era.”
In other words, they’re preparing for the day when consoles disappear and Xbox isn’t actually a box anymore.
On the date of publication, Lou Carlozo held a long position in NFLX.
View more information: https://investorplace.com/2021/01/8-best-entertainment-stocks-to-buy-in-a-changing-media-landscape/