In this article, we will take a look at the 7 best entertainment stocks to buy according to analysts.
A Future Outlook for Global Entertainment
According to a report by PwC, global entertainment and media industry revenues rose 5% to $2.8 trillion in 2023 and are expected to hit $3.4 trillion in 2028, growing at a 3.9% compound annual growth rate. Advertising revenue is projected to account for more than half of the total industry’s revenue growth over the next five years and is set to hit $1 trillion in 2026. 2028 revenues will be representing double the 2020 revenues in this case.
Simultaneously, streaming service usage and consumer uptake continue to grow although at a slower pace than in recent years. This is because of increased competition and problems in making consumers pay more for digital goods and services. As a result, streamers are exploring new revenues beyond subscriptions as they look to industry consolidation, the introduction of live sports, password-sharing crackdowns, and ad-based revenue models to drive growth with intensified competition.
The analysis further revealed that global gaming including e-sports serves as one of the fastest-growing entertainment and media sectors globally, with its revenue all set to top $300 billion in 2027 after hitting $227.6 billion in 2023. Live music and cinema are other key growth industries.
Hollywood’s Recent Grim Past: Where is the Industry Heading?
In 2023, Hollywood witnessed its first industrywide shutdown in a long time. The Hollywood actors’ union representing more than 150,000 television and movie actors went on strike following screenwriters who walked off the job earlier. With movie watchers heading in low counts to the cinemas post-pandemic and people at home shifting from cable and network television to streaming entertainment, the scenario has evolved. Both the actors and writers were demanding increased pay and protection from AI.
With shows and movies moving to streaming services, actors who relied on residual payments which were paid out when films or movies were replayed, saw the situation as unfair. According to them, it was not always clear how often content was replayed due to this shift which led to significantly low money for them. The other key issue concerning actors and writers was the threat of AI being able to write scripts and create characters by using actors’ images. After having the production shut down for almost 4 months, the actors’ union reached a tentative agreement with Hollywood film and TV studios, including significant increases in pay minimums and AI protections.
In June of 2024, CNN reported that Hollywood is welcoming another uncertain summer after the historic strikes. Apart from studios and streamers buying and producing fewer projects, many projects being filmed out of the country are depriving those at the core of the entertainment industry. In July, The Los Angeles Times reiterated the demoralizing situation with US film and TV production down almost 40% in the second quarter of 2024 as compared to the peak TV levels of filming activity in 2022, according to a report by ProdPro. The same report emphasized that the overall sluggish production rebound especially for feature films could partially be attributed to the risk of another strike by crew members in 2024.
Although the US entertainment industry is slowly recovering from the aftermath of last year’s major strike, the upcoming Halloween season brings opportunity amid production slowdown. With that being said, let’s move to the 7 best entertainment stocks to buy according to analysts.
Our Methodology:
In order to compile a list of the 7 best entertainment stocks to buy according to analysts, we first sifted through ETFs and online rankings to gather a preliminary list of 25 such stocks. We then selected the top 7 stocks that had the highest upside potential. The 7 best entertainment stocks to buy according to analysts are arranged in ascending order of their average upside potential, as of October 21.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Best Entertainment Stocks To Buy According to Analysts
7. The Walt Disney Company (NYSE:DIS)
Average Upside Potential: 15.65%
Number of Hedge Fund Holders: 92
The Walt Disney Company (NYSE:DIS) serves as the world’s premier entertainment company which is home to some of the popular brands known globally. The firm is a leading diversified international family entertainment and media enterprise that includes three core business segments namely Disney Entertainment, ESPN, and Disney Experiences.
The company has a unique and unmatched portfolio of businesses ranging from movies to television, theme parks to consumer products, and sports to news. This complementary and balanced portfolio helps Disney generate value altogether. Reiterating Disney’s uniqueness, here are some comments from the executive commentary for Q3 2024:
“Core to that century of success is the dynamic way we leverage our world-class creativity across multiple business and revenue streams to fuel long-term value. The unmatched creative power of our film and television studios, the wide appeal of our brands and franchises, and the innovative ways we bring our stories to life in our theme parks and experiences is distinctly Disney in a world of entertainment that is crowded with choices”
For its third quarter ended June 29, 2024, the company reported strong double-digit percentage growth of 19% for total segment operating income and 35% for adjusted EPS. Driven by improved results at Direct-to-Consumer and Content Sales/Licensing and Other, the Entertainment segment operating income almost tripled year-over-year. While Direct-to-Consumer’s performance remained better than expected, Content Sales/Licensing and Other favored from one of the highest-grossing animated films of all time, Inside Out 2.
In conclusion, The Walt Disney Company (NYSE:DIS) is one of the top entertainment companies boasting an unrivaled and solid portfolio, a strength which has been evident in the firm’s success as well as results. As of Q2, the stock is held by 92 hedge funds.
6. Caesars Entertainment, Inc. (NASDAQ:CZR)
Average Upside Potential: 17.31%
Number of Hedge Fund Holders: 54
Caesars Entertainment, Inc. (NASDAQ:CZR) is one of the world’s most diversified casino-entertainment providers. It serves as the largest casino-entertainment company in the United States. The firm’s resorts operate primarily under the Caesars, Harrah’s, Horseshoe, and Eldorado brand names.
The firm is a global leader in gaming and hospitality. Caesars has it all in the form of one-of-a-kind destinations, impeccable service, and diversified gaming, entertainment, and hospitality amenities. Offerings from Caesars Entertainment, Inc. (NASDAQ:CZR) encompass some of the biggest entertainment, elite meeting and conventions facilities as well as the finest restaurants. Caesars has a rich legacy which started in Nevada more than 80 years ago while the firm grew through the development of new resorts, acquisitions, and expansions to operate across four continents.
For the second quarter of 2024, Caesars Entertainment, Inc. (NASDAQ:CZR) generated $1 billion of adjusted EBITDA on a consolidated basis. GAAP net revenues of $2.8 billion were recorded versus $2.9 billion in the prior-year period. The operating trends remained strong across the Las Vegas segment whose adjusted EBITDA climbed over the year as well as the Caesars Digital segment which posted a new second-quarter adjusted EBITDA record of $40 million.
With a clear dominant position in the US gaming landscape, leading brands, a thriving legacy, and first-class destinations and amenities, Caesars Entertainment, Inc. (NASDAQ:CZR) is a promising entertainment stock.
5. Take-Two Interactive Software, Inc. (NYSE:TTWO)
Average Upside Potential: 19.15%
Number of Hedge Fund Holders: 48
Take-Two Interactive Software, Inc. (NYSE:TTWO) is a leading multi-platform developer, publisher, and marketer of video games globally. Its products are designed for console gaming systems, PC, smartphones, and tablets. These products are delivered through physical retail, digital download, online platforms, and cloud streaming services. The company is headquartered in New York City.
Take-Two Interactive Software, Inc. (NYSE:TTWO) is focusing on interactive entertainment, the strongest growth segment of the entertainment industry. Some of the strategic advantages to the firm’s growth include a diverse multiplatform portfolio of industry-leading titles and owned intellectual property spanning key genres, leading global marketing and sales distribution, and best-in-class service capabilities. Additionally, the future market opportunity across the global video game market is vast.
For the first quarter of its fiscal year 2025, total net bookings grew 1% to $1.22 billion as compared to $1.20 billion during the prior-year period. The largest contributors to these bookings were NBA 2K24, Grand Theft Auto Online and Grand Theft Auto V, Empires & Puzzles, and Match Factory! among others. GAAP net revenue increased 4% to $1.34 billion while recurrent consumer spending which accounted for 82% of total GAAP net revenue, increased 3%.
The gaming industry is presenting the company with strong secular tailwinds, with an estimated 3.4 billion global video game players and 88 billion mobile game downloads in 2023 as well as the mobile and tablet market hitting approximately $136 billion in 2023 gross bookings. Thus, Take-Two Interactive Software, Inc. (NYSE:TTWO) is positioned for a long-term trajectory of growth considering the firm’s aforementioned strengths and industry prospects.
4. Golden Entertainment, Inc. (NASDAQ:GDEN)
Average Upside Potential: 23.10%
Number of Hedge Fund Holders: 11
Golden Entertainment, Inc. (NASDAQ:GDEN) owns and operates a diversified entertainment platform, comprising a portfolio of gaming assets focused on casino and branded tavern operations. This portfolio includes eight casino properties in Nevada, and over 70 branded taverns targeting local patrons located primarily in the Las Vegas metropolitan area.
The company has focused casino and branded tavern operations in Nevada and is well-positioned to capitalize on Nevada’s long-term demand drivers. Nevada serves as the most attractive gaming market with promising conditions. Some of these include Clark County population growing 3.8x faster than total US, a rebound in Las Vegas visitation, and Nevada having the two largest gaming markets in the country. To focus on core operations in the Nevada market, the firm sold its Rocky Gap Casino Resort as well as the Distributed Gaming Operations in Montana and Nevada. In terms of gaming tax rates, Nevada is ideal as well.
Golden Entertainment, Inc. (NASDAQ:GDEN) reported second-quarter revenue of $167.3 million and adjusted EBITDA of $41.2 million, as compared to revenues of $286.7 million and adjusted EBITDA of $58.4 million in the prior-year period. The results were primarily impacted by the exclusion of the results for the already-sold Rocky Gap Casino Resort and distributed gaming operations in Montana and Nevada.
With focused operations in Nevada and opportunistic divestitures for an improved focus, Golden Entertainment, Inc. (NASDAQ:GDEN) is in a good place to benefit from the favorable conditions in the market.
3. MGM Resorts International (NYSE:MGM)
Average Upside Potential: 34.63%
Number of Hedge Fund Holders: 44
MGM Resorts International (NYSE:MGM) is a global gaming and entertainment company with national and international locations that feature hotels and casinos, meetings and conference spaces, live and theatrical entertainment experiences, and restaurant, nightlife, and retail offerings.
MGM Resorts is an international brand. The firm’s 50% owned venture BetMGM offers sports betting and online gaming in North America through market-leading brands. Simultaneously, its subsidiary LV Lion Holding Limited offers sports betting and online gaming through market-leading brands in several jurisdictions across Europe. The MGM Resorts portfolio includes 31 unique hotel and gaming destinations across the world which encompasses some of the most recognizable resort brands in the industry. While the firm operates some of the finest casino properties globally, it constantly reinvests in its properties to maintain its competitive advantage.
MGM Resorts International (NYSE:MGM) continued to drive positive financial results in Q2. The firm reported record 2Q consolidated net revenues of $4.3 billion and record 2Q MGM China Adjusted Property EBITDAR of $294 million. MGM also made progress with its international digital strategy through the strategic relationship with Playtech to be the only US operator to offer live casino content from the Las Vegas Strip and the announced acquisition of Tipico’s US platform thereby bringing sports betting product in-house.
Therefore, MGM Resorts International (NYSE:MGM) operates the highest quality resorts in each of the markets in which the firm operates. As of Q2, the stock is held by 44 hedge funds.
2. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY)
Average Upside Potential: 55.19%
Number of Hedge Fund Holders: 27
Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) owns and operates over 200 venues in North America offering premier entertainment and dining experiences to guests through two distinct brands, Dave & Buster’s and Main Event. The first Dave & Buster’s opened in Dallas in 1982.
The company has two industry-leading brands which gives it a strong position in the rapidly growing experiential entertainment sector. The footprint is extensive with 166 Dave & Buster’s branded stores in 43 states, Puerto Rico, and Canada. The firm also operates 60 Main Event branded stores in 21 states.
Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) continues to undertake growth initiatives. The firm has realized significantly lower price than competitors since COVID. It is also focusing on remodeling since remodeled stores have experienced significant sales and traffic growth. Simultaneously, the special events business is improving with substantial growth in same-store sales. Furthermore, the firm continues to refine its menu and engages in strategic games pricing.
Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) reported second-quarter revenue of $557.1 million, up 2.8% year-over-year. Adjusted EBITDA increased 8.1% from the second quarter of 2023 while net income went up from $25.9 million in Q2 2023 to $40.3 million. In the quarter, the firm opened two new Dave & Buster’s stores in Port St. Lucie, FL and Johnson City, NY, while it remodeled nine Dave & Buster’s stores. The CEO Chris Morris was a bit disappointed with the same-store sales performance amidst a challenging environment but was pleased with the strong financial results.
Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) serves as the ultimate experiential entertainment destination and changes the whole eat, play, and watch experience. The firm boasts an exceptional business model alongside industry-leading brands and organic growth initiatives in place.
1. Lions Gate Entertainment Corp. (NYSE:LGF-B)
Average Upside Potential: 62.96%
Number of Hedge Fund Holders: 25
Lions Gate Entertainment Corp. (NYSE:LGF-B) is a global entertainment leader. Lions Gate operates one of the largest independent motion picture companies in the world, the Lionsgate Motion Picture Group. The company’s television business Lionsgate Television Group encompasses over 100 shows spanning numerous platforms. Lions Gate also operates a premium global subscription platform STARZ with a focused content strategy driving continued growth. Additionally, Lionsgate Studios serves as one of the leading stand-alone, pure-play public content companies.
The company’s 20,000+ title film and television library has given it the privilege of having one of the largest and most valuable title film and television libraries. Lionsgate Worldwide Television Distribution Group enables the distribution of current properties from the studio’s Television and Motion Picture Groups and the select STARZ original series to more than 250 clients covering AVOD, SVOD, linear, and free TV platforms.
For the first quarter of fiscal 2025, Lions Gate Entertainment Corp. (NYSE:LGF-B) reported solid results despite strikes and industry disruption. The Studio Business comprising the Motion Picture and Television Production segments experienced a 5.9% decline in revenue year-over-year. Motion Picture segment profit rose with performance driven by strong theatrical results from The Strangers: Chapter One, robust home entertainment performances from various theatrical titles, and lower P&A spend and content amortization.
Television Production segment revenue experienced a profit decline due to the strikes affecting the timing of deliveries in a heavily backloaded year. Simultaneously, Media Networks North American revenue grew 1% to $345.3 million. Therefore, Lions Gate Entertainment Corp. (NYSE:LGF-B) is a leading entertainment company supported by resilient businesses.
While we acknowledge the potential of LGF-B as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than LGF-B but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
