The 2016 Olympics are quickly approaching, scheduled to be held August 5 through August 21 in Rio.
There are already some issues for the games. Political and economic turmoil in Brazil has made some people concerned, and a doping scandal has removed some Russian athletes from these Olympics entirely.
However, despite these issues, as well as concerns about the Zika virus from athletes and countries sending their stars, this Olympics should have no problem generating viewership.
And a strong 2016 Olympics in terms of viewership and athlete participation could be a major catalyst for these three stocks.
Stocks to Buy for the 2016 Olympics: Comcast Corporation (CMCSA)
Comcast Corporation (CMCSA) and its NBC Universal business segment are one of the best stocks to buy in support of the 2016 Olympics. NBC Universal has the television rights across the United States for the Rio Olympics and many future Olympic Games.
NBC Universal won the rights to the 2014, 2016, 2018 and 2020 Olympic Games, beating bids from Twenty-First Century Fox Inc (FOXA) and Walt Disney Co‘s (DIS) ESPN.
While this cost NBC Universal $4.4 billion, it will likely be seen as a wise investment, as popularity grows for Olympic viewership across multiple platforms in the U.S. In 2014, Comcast upped its Olympic exclusivity by renewing the Olympic deal through 2032. These six additional Olympic Games cost $7.75 billion.
NBC Universal has now spent over $12 billion to win the multiplatform rights to the 2014 through 2032 Olympic Games, including this year’s Rio Olympics. In 2012, the London Olympics went from a possible losing battle for Comcast to a noticeable profit. The company estimated it would get 200 million viewers and post a small loss of $200 million on the games. The opposite proved true, with a record-breaking 219.4 million viewers and a profit on the games.
The London Games became the most-watched U.S. event in television history. Viewership was up 2% from the prior Summer Olympics, held in Beijing. Around 70% of the U.S. population tuned in to the 2012 Olympics. NBC Universal saw a primetime average of 31.1 million viewers.
Time will tell if the 2016 Olympics also post record-breaking numbers. The initial demand seems to be there, with three Olympic Trial events placing in the top 25 for their respective week in overall viewers.
Comcast bets heavily on the Olympic Games. In return, it is able to get high amounts for advertisements and also promote its own products. The 2008 Olympics saw average advertising rates of $725,000. That is bound to go up for the 2016 Olympics.
Comcast used the 2012 Olympics as a chance to boost several of its cable channels (CNBC, MSNBC, NBCSN, BRAVO). The cable networks generated 82.4 million viewers, which represented a gain of 160% from a normal week. Comcast was also able to boost its website properties (1.9 billion page views) and sports-related apps.
Comcast’s NBC Universal business continues to grow and be a huge bright spot for shareholders. In the last fiscal year, NBC Universal posted revenue gains of 11.9%, compared to a gain of 8.3% for the overall company.
Comcast shares trade near their 52-week high, which shouldn’t come as a huge surprise. Along with growing subscribers, other segments like theme parks (see my latest on Harry Potter theme park expansion) continue to boost revenue and profits, and make Comcast one of the best media stocks to buy.
Stocks to Buy for the 2016 Olympics: Visa Inc (V)
Visa Inc (V) has been a corporate sponsor of the Olympic Games for 30 years. The credit card company is becoming a big play on the 2016 Olympics with its desire to show off new payment technology and use the Rio Olympics as a test before some of its technology launches on a global scale.
Visa is the exclusive payment provider of the 2016 Olympics. This means it is the only card accepted at Olympic venues and sporting events. Visa plans on providing more than 4,000 point-of-sale terminals in Rio and also 11 co-branded ATMS.
During the 2012 Olympics, the average visitor spent $1,830, representing a big opportunity for Visa. More than 1.2 million travelers are expected for the Rio Olympics.
Visa launched its most ambitious Olympic advertisement campaign with its new “Carpool” commercials. These commercials, which started airing in June, feature Olympic athletes.
Visa said in a statement, “Our commitment to acceptance ensures you can use your Visa card whether you click, dip, tap, or swipe to pay.” The commercials will highlight all of those methods.
Team Visa athletes in the commercials will be testing a new payment method during the Rio Olympics. Athletes are getting Visa payment rings. The ring allows users to tap against a NFC compatible terminal to make a payment. The ring does not have to be recharged or have a battery replaced. Rings are water resistant up to 50 meters.
If athletes like the rings, you can bet they will be sharing their experience across their social media channels. Visa will be using the athletes as a test and also to get some marketing and brand awareness to consumers in the meantime.
Between the commercials aired during the 2016 Olympic and the new payment technologies shown off, Visa should be one of the top stocks to buy to gain from the Rio Olympics.
Visa is seeing strong growth in revenue and earnings, despite weaknesses in several international regions including China and Brazil, where the 2016 Olympics are being held. The Rio Olympics could lead to an improvement in Brazil. Second-quarter revenue increased 6%. Payment volume growth was up 12% and processed transactions were up 9%.
Visa has been buying back its own shares, which it believes are undervalued. The company purchased $1.8 billion worth of shares in the second quarter at an average price point of $72.23.
In the first six months of the current fiscal year, Visa has purchased $3.8 billion of its own shares at an average of $75.47. Around $4 billion remains on the current buyback. Add the buybacks with revenue guidance of 8% and you have a strong stock, regardless of what the 2016 Olympics bring.
Stocks to Buy for the 2016 Olympics: Discovery Communications Inc. (DISCA)
Discovery Communications (DISCA) is less of a play on the 2016 Olympics than a play on the overall health in Olympic viewership numbers. Discovery has a hidden asset in Eurosport, which is quickly becoming a major force in the sports television world and has been called the ESPN of Europe.
Discovery has a lot to gain from a strong showing at the Rio Olympics, and investors and analysts could finally see the international sports opportunity this media stock has.
Discovery Communications is well known for its long-standing cable channels like Discovery, TLC and Animal Planet. The company is also the owner of Eurosport, a channel that is available in 93 countries and is available to more than 240 million homes. In 2012, Discovery Communications acquired a 20% stake in Eurosport. It would boost its ownership once more before outright acquiring the company in 2015.
Discovery Communications signed the television and multiplatform rights to the future Olympic Games in 2018, 2020, 2022, and 2024 across all of Europe, excluding the U.K. (2018, 2020). Discovery paid $1.45 billion for these future rights.
The addition of the Olympics makes Eurosport an even bigger asset for Discovery Communications. Discovery has already signed several sub-license deals for future Olympics to be shown in the U.K., Netherlands, Austria and Switzerland. More rights could be sold with a strong viewership showing at the Rio Olympics.
Discovery signed a deal with BBC in the U.K. for the next five Olympic games. The deal will give Discovery the pay television rights to U.K. Olympic coverage in 2018 and 2020 in return for BBC getting free television rights in 2022 and 2024.
While the company won’t be airing content from the 2016 Olympics, any positive numbers from Europe should go a long way in showing how valuable of a future asset this is for Discovery. Since its initial stake, Discovery has helped land more than 70 sports rights deals for Eurosport.
In 2015, Eurosport contributed $507 million in revenue, around 9% of Discovery’s total. That figure was growth of 54% and should continue to rise as Discovery invests in exclusive sports content.
Discovery shares were hit hard from Brexit concerns, as the company gets a large portion of its revenue from European nations, including the United Kingdom. However, Discovery has already tried to ease the impact on investors with its currency hedging and investments elsewhere.
The first fiscal quarter was an OK one from Discovery. Overall revenue was up 2%, thanks to an impressive U.S. segment, which saw growth of 8%. International business struggled with revenue down 3% and operating income down 14%.
With Eurosport growing, I expect Discovery’s international business to see better growth ahead and remain a major catalyst, highlighted by the rights to future Olympic content.
Shares of Discovery Communication trade just above their 52 week low, offering a prime time to buy shares.
As of this writing, Chris Katje did not hold a position in any of the aforementioned securities.
