Coronavirus vaccines, variants and new waves of infection, global supply chain issues, stocks of memes fueled by Reddit, mergers and acquisitions, and streaming hopes and fears were some of the ingredients that have made 2021 another year of volatility for stocks, including those in audio entertainment companies and stocks of Hollywood giants.
But as the broader stock market is on its way to ending the year up significantly, just like in 2020, the media and entertainment industry is looking to wrap it up with a mix of big winners and losers and several names to barely changed, with many winners even underperforming the overall S&P 500 index.
The S&P 500, which closed at 4,788.64 on Wednesday, rose 28.4% for the year as it closed on December 29, before the last trading day of the year. By comparison, large Hollywood conglomerates, such as Walt Disney Co. and ViacomCBS, both of which hit a 52-week low in December, have seen their shares drop significantly for the period since the start of the year.
Many industry stocks had fallen in 2020 due to COVID-19’s first hit on the savings and advertising of Hollywood giants and other companies, as streamers gained on subscriber jumps amid Home orders, followed by the mixed bag that was 2021. from various companies in the industry gained amid hopes of a potential rise in reopening economies after the virus crisis and the growth of the streaming space.
These stocks were hit often later in the year due to concerns about the omicron variant and the growing cost of competition for subscribers in the streaming age. Disney, which had seen share gains in the first pandemic year on investor optimism over Disney + ‘s early success, faced new investor questions in 2021.
The slowdown in user growth led to a debate on Wall Street over whether the Mouse House, led by CEO Bob Chapek, would meet its longer-term streaming subscriber goals, weighed on the action as Bob Iger leaves the company at the end of the year. As of the market close on Wednesday, Disney shares were down 14.3% so far for the year to $ 154.87.
While ViacomCBS reported streaming growth, its shares continued to decline in 2021 after also ending 2020 lower. “ViacomCBS performs well on Paramount + with a solid content pipeline driving subs,” Wells Fargo analyst Steven Cahall noted in a Dec. 10 report in which he maintained his “overweight” rating with a target price of $ 60. âStill, the market doesn’t look bullish on the long-term streaming outlook.â
Cahall argued that the new year would focus a lot on this theme: âWe see 2022 largely about demonstrating continuous financial data (eg, peak losses) as Paramount + continues to expand. Shares of ViacomCBS closed Wednesday at $ 29.99, down 18.3% on the year.
It was a sunnier picture for Sony Corp.’s U.S.-listed stock, as its business ranges from film and television assets to its music and video game units to consumer electronics, diversifying its business. exposure to different parts of the economy. Sony, which closed at $ 112.00 on Wednesday, followed a strong rise in stocks in 2020 with a 25.6% gain in 2021, roughly in line with the change in the S&P 500.
Streaming powerhouse Netflix – which posted a 16.4% share price rise in 2021 as it closed at $ 610.54 on Wednesday – also recorded two consecutive years of gains linked to the COVID pandemic , even if it underperformed the general market index. After its stock rose about 60% in 2020 thanks to a surge in subscribers driven by home orders, Netflix struggled with tough comparisons a year ago for parts of 2021 before a surge in optimism thanks to subscribers and profit from surprises in the third quarter and the success of originals such as Squid game and a pipeline of original tariffs that have received the approval of various analysts.
Roku as a streaming action also jumped in 2020, but has receded in the past year, with more consumers leaving their homes after the first COVID hit and the global supply chain crisis has taken an impact. on the growth of active accounts and income and expectations of Street. On December 29, Roku saw its stock price close at $ 224.80, which was a sharp drop of 33.6% in 2021.
The actions of movie theaters, which had hoped for a post-COVID comeback, also had different experiences in 2021. Improving investor sentiment thanks to vaccination programs and the reopening of circuits was followed by reshuffles of the list. movies and the emergence of the omicron variant causing further concern at the end of the year.
The World’s Largest Exhibitor AMC Theaters, thanks to its memes stock status, has seen the strongest growth over the past 12 months, trending upward to 1,193.98% for 2021 at market close Wednesday at $ 27.95. However, London-listed shares of Cineworld, the world’s second-largest channel, closed at 31.90 pence, down 51.4% in 2021. This was due to a sharp drop at year-end in amid the omicron spread that has rekindled concerns about the company’s high leverage. Reports indicated that the company’s shares were one of the most “short-circuited” UK stocks, with bearish investors expecting the stock’s value to fall further.
Cinemark Holdings, the world’s No.3 film company with a strong presence in Latin America, receives high ratings from analysts. But its stock appeared to end the year down 7% after closing at $ 16.52 on December 29. And Imax, which had a strong box office performance before the holiday season, was on track to end 2021 down almost 2% after closing at $ 18.09 on Wednesday.
Mid-sized media and entertainment companies, meanwhile, posted gains that outperformed the S&P 500 over the past year, or remained roughly flat. Fox Corp. has received rave reviews from various analysts for its advantages in the booming sports betting arena and focuses on news and sports TV content, with its Class A stock up 27.5% since the start of the year. year when it closed at $ 37.09.
Meanwhile, AMC Networks and Lionsgate have invited to discuss deals over the past year, which has increased their inventories. Lionsgate’s Class A stock, which closed at $ 15.95, jumped 42.7% for the year after the company revealed it was exploring its options for Starz. This included a possible separation of the pay-TV and streaming business and its studio operations.
When Josh Sapan, longtime CEO of AMC Networks, resigned this summer with Matt Blank becoming interim CEO, some on Wall Street wondered if the change in leadership could mean a sale could take place in the future. of the company. With no suitors yet to come forward, shares of AMC Networks have fallen 2% so far in 2021 after closing at $ 34.45 on Wednesday.
In contrast, stocks involved in the entertainment industry’s biggest deal of 2021 have had different trajectories over the past year. Discovery unveiled a mega-deal in May to merge with AT & T’s WarnerMedia into Warner Bros. Discovery by mid-2022 and received European Union clearance for the transaction just before the holiday season. Discovery, after falling in 2020, lost further ground in 2021, trending down 20% towards the end of the year as it closed at $ 23.87 on Wednesday.
Meanwhile, shares of AT&T – which will combine its WarnerMedia business with Discovery pending the deal’s closing – so far in 2021 are down 13.5% after closing at 24.64. Other major pay-TV distribution players, whose finances and stocks have benefited from a broadband boon in recent years, came under pressure at the end of 2021 amid slowing subscriber growth broadband.
âAfter a year in which every stock we cover – yes, every one of them – has vastly underperformed the market, it seems appropriate to start our annual review / overview with a blues song,â Craig wrote. Moffett, analyst at MoffettNathanson, in a report just before Christmas. “For cable investors in particular, the puff of pessimism at the end of an era is inevitable.”
Shares of cable powerhouse and NBCUniversal owner Comcast held up better than others, down just 1.2% as 2021 nears end after its share price closed at $ 50.59 Wednesday. Cable giant Charter Communications rose just over 4% for 2021 to close at $ 656.28.
Regarding 2022, Tuna Amobi, analyst at CFRA Research, tells THR that catalysts for entertainment stock performance include âpent-up consumer demand for live sports and out-of-home entertainmentâ and potential stock movements linked to signs of success in the streaming industry.
There will be winners and losers, however, as Morgan Stanley analyst Benjamin Swinburne noted in a Dec. 15 report. âGrowth in streaming, advertising and live entertainment will lead to strong revenue growthâ in media and entertainment companies in 2022, he predicted.
“Strong trends in demand across the board, but rapidly rising content costs are creating (a) a wide range of risks and rewards across the group” of stocks it covers, warned Swinburne. âThe primary factor that will dictate a company’s ability to generate profits or margins that meet or exceed expectations next year is the ability to navigate quickly while appreciating content costs. “