In this article, we discuss the 11 best entertainment stocks to buy. To read a detailed analysis of the entertainment industry, go directly to 11 Best Entertainment Stocks to Buy.
5. Nexstar Media Group, Inc. (NASDAQ:NXST)
Number of Hedge Fund Holders: 33
Nexstar Media Group, Inc. (NASDAQ:NXST) is the largest television station owner in the US. In early October, the company announced the acquisition of 75% of the CW Network’s stake from Warner Bros. Discovery, Inc. (NASDAQ:WBD) and Paramount Global (NASDAQ:PARA). The acquisition is expected to consolidate and increase Nexstar Media Group, Inc. (NASDAQ:NXST)’s exposure to the national advertising market and create new revenue-generating opportunities.
Nexstar Media Group, Inc. (NASDAQ:NXST)’s Next Gen TV or ATSC 3.0 is also an excellent growth catalyst for the company. The Next Gen TV includes more channels and better sound, quality, reception, and mobile viewing. The company expects that half of the television users in the US will have acquired the technology by the end of 2022 and the technology has the potential to increase the customer base for the company.
On September 9, Rosenblatt analyst Barton Crockett upgraded Nexstar Media Group, Inc. (NASDAQ:NXST) to Buy from Hold and raised his price target to $246 from $181.
4. Boyd Gaming Corporation (NYSE:BYD)
Number of Hedge Fund Holders: 35
Boyd Gaming Corporation (NYSE:BYD) is Nevada-based gaming, hospitality, and entertainment company. Most of the company’s revenue is generated from the gaming segment.
Boyd Gaming Corporation (NYSE:BYD) is one of the companies in its respective segment that swiftly recovered from its COVID falls. Compared to its 2019 levels, the net income of the company grew from $93.9 million to $409.69 million in Q2 2022. The operating income in the specified period rose from $244.3 million to $496.12 million. Furthermore, the company resumed its dividend payout after a brief pause of two years. On top of that, the company has brought down its net debt by 13% on a YoY basis.
According to the Insider Monkey database, 35 hedge funds held positions in Boyd Gaming Corporation (NYSE:BYD) in Q2 2022. HG Vora Capital Management increased its stake in the company by 27% to $236.313 million and remained the largest stakeholder in the company.
Here is what Baron Funds had to say about Boyd Gaming Corporation (NYSE:BYD) in its Q2 2022 investor letter:
“Boyd Gaming Corporation is one of the largest and most successful casino entertainment companies in the U.S. The company owns and operates 28 casino gaming properties in 10 states with a large presence in Las Vegas. Business conditions have been strong, yet the shares are valued at only 6 times 2022 estimated cash flow versus a long-term average of more than 9 times cash flow. The company maintains a strong and liquid balance sheet. Insiders own approximately 27% of the company. We believe Boyd is a compelling acquisition target.”
3. Formula One Group (NASDAQ:FWONK)
Number of Hedge Fund Holders: 46
Formula One Group (NASDAQ:FWONK) promotes the FIA Formula One World Championship, the biggest single-seater formula racing cars promotion in the world.
Formula One Group (NASDAQ:FWONK) faced multiple headwinds in 2019 and 2020, mostly due to the pandemic. However, after the release of its Netflix documentary “Drive to Survive” and lockdown ease, the company has done wonders on its financial statements. Formula One Group (NASDAQ:FWONK) faced a loss of $2.57 per share in 2020 and recorded an EPS of $0.39 in 2022 and is expected to post an EPS of $1 in 2023. The company saw a 35% increase in its revenue on a YoY basis in its June quarter and an adjusted OIBDA change of 133% to $154 million.
On August 8, Pivotal Research analyst Jeffrey Wlodarczak reaffirmed a Buy rating on Formula One Group (NASDAQ:FWONK)’s shares and raised his price target to $77 from $45 after “strong” Q2 results. The analyst further added that his higher broadcast fees might still be conservative viewing the increased participation in sports rights fees by streaming players.
Here is what East 72 Fund had to say about Formula One Group (NASDAQ:FWONK) in its Q3 2022 investor letter:
“There are two listed SPORTS, both of which have suffered pressures in this respect over past years: World Wrestling Entertainment (WWE) and Formula 1 motor racing (via Liberty Formula 1 tracker stock: FWONA/FWONB/FWONK). We have owned both in the past. A very brief analysis of each is instructive in understanding where and why we do have exposures.
Formula 1 is now virtually unchallenged in its dominance of high end motor sport – the biggest circus on earth. It has a monopoly from FIA on the “World Championship” through to end-2110 Having morphed from a series of races controlled by the teams, then the “legendary” entrepreneur, Bernie Ecclestone, the organisation was acquired by Liberty Media in late 2016. This acquisition has coincided with a rebirth in the sport, with the 7th and 8th “Concorde” Agreements cementing in place the incentives for the major teams to stay in the sport and not attempt a breakaway series…” (Click here to see the full text)
2. Take-Two Interactive Software, Inc. (NASDAQ:TTWO)
Number of Hedge Fund Holders: 66
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is an American video game creator. The most significant franchises in the company’s portfolio include the BioShock series, Grand Theft Auto, Red Dead, and NBA 2K.
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is one of the best entertainment stocks due to its entry into the fast-growing metaverse with Grand Theft Auto 6. The game is expected to release in 2024. To put things into perspective, the series has made over $7 billion since the release of its last game, Grand Theft Auto V.
According to the Insider Monkey database, 66 hedge funds had a stake in Take-Two Interactive Software, Inc. (NASDAQ:TTWO), valued at over $2 billion, compared to 58 hedge funds in the previous quarter with a combined stake value of $1.548 billion. In Q2, Viking Global increased its holdings in the company by 240% and was the most significant shareholder of the company with approximately 2 billion shares, worth $245 million.
Here is what Madison Funds specifically said about Take-Two Interactive Software, Inc. (NASDAQ:TTWO) in its Q2 2022 investor letter:
“Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is a leading publisher of video games. Take-Two has a reputation for the high quality of its games, having published industry favorites such as Grand Theft Auto and NBA2K.
The video game industry itself has shed much of its boom-and-bust patterns to become a steadier, more predictable business with high barriers to entry, established title franchises, and high levels of recurring, in-game revenue streams. The company has been investing heavily to step up the number of new title launches over the next few years, a favorable set-up which we believe is not fully reflected in its stock price.”
1. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 109
The Walt Disney Company (NYSE:DIS) is a California-based mass media and entertainment company. The company has a diverse portfolio which includes films, theatre, television, theme parks, sports content, cruise lines, along with many others.
The Walt Disney Company (NYSE:DIS) is one of the best entertainment stocks because of its multiple growth drivers. The company is expected to generate some decent recurring revenue in the Halloween season with its cult classics like Hocus Pocus and Halloween Town. Furthermore, the company has expanded its Disney+ streaming services to 42 new countries. The number of subscribers for the service rose from 26.5 million in Q1 of 2020 to 152.1 million in Q3 2022. The Disney+ service is one of the most significant sources of future cash flow, and increased revenue and earnings.
Moreover, The Walt Disney Company (NYSE:DIS) recently opened its parks after the COVID lockdowns and saw a huge comeback in that business. The park revenue surged by 70% to $7.4 billion in one year even though the Asian parks remain closed.
On October 4, JPMorgan analyst Philip Cusick maintained an Outperform rating on The Walt Disney Company (NYSE:DIS) and lowered his price target to $145 from $160.
Here is what Oakmark Fund had to say about The Walt Disney Company (NYSE:DIS) in its Q2 2022 investor letter:
“Disney (NYSE:DIS) is one of the most beloved consumer companies in the world. Its media business has a rich library of intellectual property, which provides a powerful engine for creating new content across the Disney, Pixar, Marvel, and Star Wars brands. This content also contributes to the success of Disney’s theme parks, which generated nearly half the company’s earnings and grew more than 10% annually in the decade prior to the pandemic. Shares have fallen nearly 50% over the past year as investors worried about the company’s ability to transition its media business to a direct-to-consumer streaming world. This transition has required management to make investments in its Disney+ streaming service that are depressing profitability today. However, we believe these investments will ultimately produce attractive returns as Disney+ continues to grow subscribers and increase pricing over time. As a result, we were able to purchase shares at a substantial discount to our estimate of intrinsic value.”
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