Below you can find our list of the 5 best media and entertainment stocks to buy now. You can find our detailed coverage of this industry and a more comprehensive list of stocks in 10 best media stocks to buy now.
5- Comcast Corp (CMCSA)
Number of Hedge Fund Holders: 78
On July 28, Comcast Corporation (NASDAQ:CMCSA) reported earnings for the fiscal second quarter of 2022. The company reported earnings per share of $1.01 and beat expectations by $0.09. The company generated a revenue of $30.02 billion, ahead of Wall Street expectations by $346.88 million. However, for the first time, Comcast Corporation (NASDAQ:CMCSA) reported a net loss of 10,000 residential subscribers in the second quarter of 2022. The company was expected to add 84,000 net subscribers in the second quarter of 2022. As of July 2022, the company has lost roughly 30,000 broadband net subscribers since the beginning of its fiscal year.
Wall Street is bearish on Comcast Corporation (NASDAQ:CMCSA). On August 1, Barclays analyst Kannan Venkateshwar downgraded Comcast Corporation (NASDAQ:CMCSA) to Equal Weight from Overweight and slashed his price target to $42 from $48 on the shares. The analyst expects cable companies to experience flat growth in 2023, and negative growth after 2023. On August 5, Redburn analyst Steve Malcolm downgraded Comcast Corporation (NASDAQ:CMCSA) to Neutral from Buy.
At the close of Q2 2022, 75 hedge funds disclosed ownership of stakes in Comcast Corporation (NASDAQ:CMCSA). The total stakes of these hedge funds amounted to $5.4 billion, down from $7.1 billion in the previous quarter with 78 positions. The hedge fund sentiment for the stock is turning negative.
As of June 30, Gardner Russo & Gardner owns more than 4.72 million shares of Comcast Corporation (NASDAQ:CMCSA) and is the largest shareholder in the company. The fund’s stakes were valued at $185.23 million.
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4- Activision Blizzard (ATVI)
Number of Hedge Fund Holders: 80
Activision Blizzard, Inc. (NASDAQ:ATVI) is an American company that publishes interactive entertainment content and services in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. Activision Blizzard, Inc. (NASDAQ:ATVI)’s sale to Microsoft is pending. Warren Buffett acquired a position in Activision Blizzard, Inc. (NASDAQ:ATVI) in Q4 2021, and in the second quarter of 2022, he raised his stake by 7%. The billionaire owned 68.40 million shares of Activision Blizzard, Inc. (NASDAQ:ATVI) in Q2, worth $5.3 billion, representing 1.77% of the total securities.
On August 4, Deutsche Bank analyst Benjamin Soff maintained a Hold rating on Activision Blizzard, Inc. (NASDAQ:ATVI) and lowered the price target on the stock to $84 from $95. The analyst has a “balanced view of the probability” of Microsoft’s pending acquisition of Activision Blizzard, Inc. (NASDAQ:ATVI) to receive regulatory authorization.
Here is what FPA U.S. Core Equity Fund has to say about Activision Blizzard, Inc. (NASDAQ:ATVI) in its Q1 2022 investor letter:
“One of the Fund’s biggest winners in the first quarter was Activision Blizzard. On January 18, 2022 Microsoft (NASDAQ:MSFT) agreed to purchase ATVI for $95.00 per share in an all-cash transaction. The Fund has been invested in ATVI since the second quarter of 2018.
The investment thesis was threefold. First, the greater than $200 billion gaming industry is the largest and fastest growing form of entertainment in the world. More than three billion people play games currently and the population of global gamers is expected to grow faster than global population growth this decade.14 Second, ATVI has some of the best intellectual property in the gaming industry including Warcraft, Diablo, Overwatch, Call of Duty and Candy Crush in addition to global eSports activities through Major League Gaming. Third, ATVI has had a pristine balance sheet with net cash over the past four years, generated robust free cash flow and traded at an undemanding valuation.
ATVI closed the quarter at $80.11—a nearly 16% discount to the acquisition price. Assuming it takes about a year for the deal to close, a 18.6% return seems to be good upside relative to the risk of a deal not closing due to anti -trust concerns. If the transaction closes it would make Microsoft the third-largest company in gaming by revenue behind Tencent and Sony. There is plenty of competition from these larger players as well as smaller competitors such as EA, Take-Two Interactive, Roblox and Epic Games’ Fortnite. The Fund remains invested in ATVI given the significant discount, but should the discount narrow in the coming quarters the Fund could reduce or eliminate the position.”
3-NFLX
Number of Hedge Fund Holders: 109
Who would have guessed that Netflix would fall from $700 to $162 in less than a year? Hedge funds believe the recent softness in Netflix shares is a buying opportunity.
Here is what Oakmark Fund has to say about Netflix, Inc. (NASDAQ:NFLX) in its Q2 2022 investor letter:
“Netflix‘s stock price was down considerably after providing a weaker than expected outlook for both subscriber growth and profit margins. After meeting with management and scrutinizing our investment thesis, we lowered our estimate of business value to account for the company’s softer near-term guidance. However, we believe the decline in the company’s share price more than adjusts for this. Indeed, Netflix now trades for a discount to the S&P 500 Index on next year’s GAAP earnings despite our view that the company remains a much better than average business run by a highly accomplished management team. We believe the company’s lead in streaming remains intact and we expect terminal operating margins to be substantially higher than they are today. Furthermore, we are encouraged by Netflix’s potential to enhance revenue growth through advertising, the monetization of password sharing and further penetrating international markets.”
2-The Walt Disney Company (DIS)
Number of Hedge Fund Holders: 113
In its Q2 2022 investor letter, Oakmark Fund mentioned The Walt Disney Company (NYSE:DIS) and explained its insights for the company. Founded in 1923, The Walt Disney Company (NYSE:DIS) is a Burbank, California-based multinational mass media and entertainment conglomerate with a $200 billion market capitalization.
Here is what Oakmark Fund has 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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1- Alphabet Inc (GOOGL)
Number of Hedge Fund Holders: 205
For Q2 2022, Alphabet Inc. (NASDAQ:GOOG) had an EPS of $1.21, missing estimates by $0.08, and reported actual revenue of $69.7 billion, missing estimates by $112 million. We believe GOOGL is cheap based on sum of the parts valuation as its cloud business is losing nearly a billion dollars each quarter and dragging down the earnings of the company. The same thing can be said about its other bets which is losing nearly $2 billion per quarter.
In its Q2 2022 investor letter, Wedgewood Partners mentioned Alphabet Inc. (NASDAQ:GOOG) and explained its insights for the company. Here is what the fund said:
“Alphabet grew its core search revenues +24% on a +30% year-ago comparison. Despite this stellar top-line performance, shares sold off as the market began to discount fears of a recession. However, the stock has outperformed relative to other holdings as core Google Search has been less affected by disruptions related to Apple’s privacy initiatives. Alphabet’s Cloud segment is generating revenue at a $24 billion run rate but is still running at a loss. We think this business can generate much better margins at some point. In the meantime, the Company has 4% to 5% of shares authorized for repurchase which is an attractive use of capital as the stock trades for about just 18X 2023 consensus estimates.”
Please also read 8 Best Stocks To Buy Now and 25 Highest Grossing Movies of All Time.
