- Media stocks faced plenty of pressure lately, despite strong trends in the overall space.
- Disney (DIS) recently reported mixed earnings, but saw robust strength in its streaming business.
- Warner Bros Discovery (WBD), a recent spinoff from AT&T (T), hasn’t gotten any love despite solid growth last quarter.
- Netflix (NFLX) is the poster child for streaming video and has seen its stock price obliterated in recent weeks.
Media stocks have been unfairly punished, in my opinion. They have seen a huge pull-forward in demand, thanks to the pandemic. In other words, the Covid-19 outbreak drove people inside their homes, where streaming video skyrocketed as a result. Ironically though, this “Covid-boost” is likely the very reason these stocks are under pressure now, even though these platforms continue to do well.
We can’t ignore the fact that a bear market is terrorizing investors and demolishing stock prices. But there has been a clear intention to harshly sell the “Covid stocks” that benefited the most during the outbreak.
Is it fair? No. Does it represent opportunity? Yes.
Media stocks continue to gain traction in their businesses, even as many parts of the world have returned to normal. Yet they still boast millions of customers and continue to add more each quarter. This is the new way of media consumption, which was the case pre-pandemic as well.
In a post-pandemic world, consumers won’t stop streaming video – even though that’s how the stocks are acting now. Let’s look at a handful of media stocks to buy on the recent dip.
|WBD||Warner Bros. Discover||$18.11|
Media Stocks to Buy: Disney (DIS)
Disney (NYSE:DIS) recently reported mixed quarterly results, missing earnings and revenue expectations. However, there were a few positives. First, its Parks and Experiences business is doing better than expected, as revenue in the most recent quarter surpassed analysts’ expectations.
What does this have to do with media though?
I’m glad you asked. Even though Disney’s parks business is doing well – indicating that consumers are out-and-about and “returning to normal” – its streaming platforms are going gangbusters.
Disney+ added 7.9 million new subscribers last quarter, well ahead of estimates calling for 2 million. It now boasts more than 137.7 million subs. When combined with its other platforms – like Hulu and ESPN+ – the total number of subscribers balloons up to more than 200 million.
This is a streaming and media juggernaut and should not be ignored. Disney stock was recently down about 51% from its all-time high, giving investors a great “sale price” to begin accumulating the stock.
Warner Bros. Discovery (WBD)
Warner Bros. Discovery (NASDAQ:WBD) is a bit more unique, given that it was just spun off from AT&T (NYSE:T) last month. It was a long-awaited move from AT&T shareholders, with the hope that it would create value as many believed that the company’s streaming assets were undervalued.
When compared to other streaming names, that seems to be the case — but the market isn’t rewarding the transaction. Since the spinoff on April 4, WBD stock has a high of $27.50 and a low of $16.51. So the pullback is actually closer to 40% than 50%. If conservative investors want to wait for a potential “next leg down,” then they can likely find this one with the 50%-plus off price tag, if the recent market trend continues to hold.
In the most recent quarter, the company’s HBO and HBO Max units added 3 million subscribers, boosting its total to 76.8 million. That’s up 12.8 million subscribers year over year.
The company is forecast to do more than $45 billion in sales this year and over $50 billion next year. While analysts expect earnings of just 64 cents a share this year, estimates call for $1.90 per share next year. If that’s the case, this stock trades at less than 10 times 2023 earnings. That’s pretty darn cheap given the assets in this scenario.
Stocks to Buy in Media: Netflix (NFLX)
Netflix (NASDAQ:NFLX) is surely the most controversial name on this list. That’s as its stock has been obliterated. Despite sporting a 52-week high from November of $700.99, shares are down a whopping 73.5% at the moment. At the recent low, Netflix stock was down about 77%.
It marks a stunning fall from grace, as just six months ago, this stock looked fantastic. However, Netflix has some headwinds. It doesn’t have the low valuation and deep catalog of classics that HBO has. It doesn’t have the deep catalog that Disney has, alongside other streaming platforms and different businesses. Instead, it has to produce or acquire its own content and in this day and age, it’s a process that has become increasingly more expensive.
However, what it does have is roughly 222 million subscribers and the crown in streaming video. If you believe the company will crack down on password sharing, add advertising or find some other way to fix its issues, then there are worse media stocks to buy than Netflix when it’s lost 70% to 80% of its value from the highs.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.