In this article we discuss the 5 best entertainment stocks to invest in. If you want to read our detailed analysis of these companies, go directly to the 10 Best Entertainment Stocks to Invest In.
5. Zynga Inc. (NASDAQ: ZNGA)
Number of Hedge Fund Holders: 47
Zynga Inc. (NASDAQ: ZNGA) is an electronic gaming & multimedia company based in San Francisco, California. It is ranked fifth on our list of 10 best entertainment stocks to invest in. The company’s shares have returned 0.86% to investors over the course of the past year. On May 5, Zynga Inc. (NASDAQ: ZNGA) posted earnings for the first quarter of 2021, reporting earnings per share of $0.13, beating estimates by $0.04. The revenue over the period was around $680.3 million, up 68.47% year-over-year.
At the end of the first quarter of 2021, 47 hedge funds in the database of Insider Monkey held stakes worth $1.14 billion in Zynga Inc. (NASDAQ: ZNGA).
On May 6, BofA upgraded Zynga Inc. (NASDAQ: ZNGA) to Buy from Neutral rating with a $13.5 price target, citing “strong” Q1 result with organic growth.
Artisan Partners Limited Partnership, in their Q4 2020 investor letter, mentioned Zynga Inc. (NASDAQ: ZNGA). Here is what the fund said:
“We also added to our position in Zynga. Our multiyear investment campaign in Zynga has been based on a new management team’s ability to drive steady growth in the company’s base portfolio of games, expand margins, reinvigorate the new game development pipeline and use its strong balance sheet to acquire complementary games and studios. Shares have been pressured in recent quarters, presumably because of investor concerns about the company’s moderating growth rate and Apple’s pending new privacy policy which will make it more difficult for Zynga to both efficiently acquire new players and sell advertising in its games. We believe the company has multiple growth levers it can pull in the periods ahead, including the rollout of new games, acquisitions, further penetration into international markets and entry into new gaming categories, to name a few. Furthermore, our research suggests the Apple privacy policy change is manageable for larger mobile game developers such as Zynga. Given our strong conviction in the profit cycle, we used recent weakness to add to our position.”
4. Sea Limited (NYSE: SE)
Number of Hedge Fund Holders: 98
Sea Limited (NYSE: SE) is a Singaporean technology conglomerate mainly specializing in areas of electronic gaming and e-commerce. It is ranked fourth on our list of 10 best entertainment stocks to invest in. The stock has returned over 124% to investors over the course of the past year. On May 18, Sea Limited (NYSE: SE) posted earnings for the first quarter of 2021, reporting earnings per share of -$0.62, missing estimates by $0.05. The revenue over the period was around $1.76 billion, up 146.69% year-over-year.
At the end of the first quarter of 2021, 98 hedge funds in the database of Insider Monkey held stakes worth $10.43 billion in Sea Limited (NYSE: SE).
On July 1, Morgan Stanley kept its Overweight rating on Sea Limited (NYSE: SE) with a $300 price target. On June 25, New Street initiated coverage of Sea Limited (NYSE: SE) with a Buy rating and a $325 price target.
3. Netflix, Inc. (NASDAQ: NFLX)
Number of Hedge Fund Holders: 110
Netflix, Inc. (NASDAQ: NFLX) is an entertainment company based in Los Gatos, California. It is ranked third on our list of 10 best entertainment stocks to invest in. The stock has returned 5.56% to investors over the course of the past year. On April 20, Netflix, Inc. (NASDAQ: NFLX) posted earnings for the first quarter of 2021, reporting earnings per share of $3.75, beating estimates by $0.76. The revenue over the period was around $7.16 billion, up 24.2% year-over-year.
At the end of the first quarter of 2021, 110 hedge funds in the database of Insider Monkey held stakes worth $14.16 billion in Netflix, Inc. (NASDAQ: NFLX), down from 116 the preceding quarter worth $15.63 billion. On July 7, Truist kept its Buy rating on Netflix, Inc. (NASDAQ: NFLX) with a $600 price target, arguing that Netflix, Inc. (NASDAQ: NFLX) has options to expand its services into podcasts and live sports as well as to consider an ad-driven revenue stream.
Polen Focus Growth Fund, in its Q1 2021 investor letter, mentioned Netflix, Inc. (NASDAQ: NFLX). Here is what the fund said:
“We purchased Netflix in March, initiating a 3% position in the Portfolio. We believe Netflix is a highly competitively advantaged company. It has recently met all our investment guardrails, and we anticipate it will remain sustainably above our guardrails over the next five years and beyond. We know Netflix for its ubiquitous streaming service and deep library of owned content. The company has made investments in this content (currently running at nearly $20 billion/year), generally keeping subscribers highly engaged and loyal to their service. The company has number one market share in 99% of markets globally, but it is our view that video streaming on-demand is still an underpenetrated space with many years of attractive growth likely ahead. The service is also relatively affordable at roughly $11/month on average globally.
We believe Netflix’s growth in content spend is beginning to moderate, which could allow margin expansion to continue for many years when paired with ongoing subscriber growth and price increases. While there is competition from the likes of Apple (Apple TV+), Amazon (Prime Video), Disney (Disney+ and Hulu), and others, we believe there can be a handful of winners in this industry. Already, we see many people subscribe to multiple streaming video services, with Netflix being their “anchor” service. That said, the barriers to entry are high, and we believe they are getting higher given the substantial amount of capital and size of the subscriber base required to maintain a competitive service for both viewers and content producers. Over the next five years, we expect Netflix’s earnings growth to be approximately 30% annualized and free cash flow to grow at an even higher rate.”
2. Activision Blizzard, Inc. (NASDAQ: ATVI)
Number of Hedge Fund Holders: 76
Activision Blizzard (NASDAQ: ATVI) is an electronic gaming & multimedia company based in Santa Monica, California. It is ranked second on our list of 10 best entertainment stocks to invest in. The company’s shares have returned 14.56% to investors over the course of the past year. On May 4, Activision Blizzard (NASDAQ: ATVI) posted earnings for the first quarter of 2021, reporting earnings per share of $0.84, beating estimates by $0.15. The revenue over the period was around $2.28 billion, up 27.24% year-over-year.
At the end of the first quarter of 2021, 76 hedge funds in the database of Insider Monkey held stakes worth $3.58 billion in Activision Blizzard (NASDAQ: ATVI).
On June 24, MoffettNathanson gave a Buy rating with a $124 price target to Activision Blizzard, Inc. (NASDAQ: ATVI). The firm noted the stability of the cash flows and net cash position on the balance sheet of Activision Blizzard, Inc. (NASDAQ: ATVI).
1. The Walt Disney Company (NYSE: DIS)
Number of Hedge Fund Holders: 134
The Walt Disney Company (NYSE: DIS), or simply Disney, is a mass media and entertainment company. It is ranked first on our list of 10 best entertainment stocks to invest in. The company’s shares have returned 51.6% to investors over the course of the past year. On May 13, Disney (NYSE: DIS) posted earnings for the first quarter of 2021, reporting earnings per share of $0.79, beating estimates by $0.53. The revenue over the period was around $15.61 billion, down 13.38% year-over-year.
At the end of the first quarter of 2021, 134 hedge funds in the database of Insider Monkey held stakes worth $12.55 billion in the Walt Disney Company (NYSE: DIS), down from 144 the preceding quarter worth $16.4 billion. On July 6, Cathie Wood’s ARK Investment bought 108.7 K shares of The Walt Disney Company (NYSE: DIS).
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