We recently compiled a list of the 10 Best Entertainment Stocks To Buy According to Analysts. In this article, we are going to take a look at where Gaia, Inc. (NASDAQ:GAIA) stands against the other best entertainment stocks to buy according to analysts.
An Overview of the Entertainment Industry
According to a report by The Business Research Company, the international entertainment and media industry was valued at $2.51 trillion in 2023. It is expected to grow at a compound annual growth rate (CAGR) of 7% to reach $3.55 trillion by 2028. Growth in the entertainment industry is driven by the rapid adoption of subscription models, the evolution of live events, and the use of augmented and virtual reality technologies.
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A report published by FTI Delta earlier this year highlighted some significant trends and challenges in the media and entertainment industry. As per the report, the live entertainment sector has experienced a robust recovery, with global spending on live music in 2023 increasing by 49% compared to 2019. Major sports leagues, including the NFL, NBA, MLS, NHL, and IndyCar, have not only recovered but surpassed pre-pandemic attendance levels. The post-pandemic recovery within the industry has not been uniform. For instance, the filmed entertainment industry faced severe challenges in late 2023 due to strikes by the Writers Guild of America (WGA) and SAG-AFTRA. These disruptions led to a more than 70% decline in production and marketing expenditures, compounding existing issues from early 2023 when studios were already tightening budgets. As a result, spending in 2023 was down approximately 35% from 2022, reflecting a struggling market. The report anticipates recovery for filmed entertainment post-strike to be more subdued than previous rebounds, with projections of about 25% year-over-year growth in 2024.
On the bright side, the report highlighted a significant growth trajectory for United States TV and connected TV (CTV) advertising, emphasizing the transformative impact of CTV on the advertising landscape. The combined US TV and CTV ad spending is projected to approach $100 billion by 2027, with CTV being the primary driver of this growth. In 2024 alone, CTV advertising is expected to increase by $5.5 billion, representing a 22% year-over-year growth. The surge in CTV advertising is largely attributed to the rise of premium ad-supported streaming services.
In addition to a robust performance expected within the advertising segment, the gaming sector remains resilient. The video game industry achieved a CAGR of 9.2% from 2019 to 2022. Despite a 6.3% decline from the peak surge during the COVID-19 pandemic, console sales in 2022 remained 18% higher than pre-pandemic levels, indicating strong ongoing demand for gaming hardware. As per the report, the overall outlook for the video game market remains positive, with expectations of above mid-single-digit growth throughout the next year.
A large flat-screen TV streaming video from a video hosting platform.
Our Methodology
To compile the list of the 10 best entertainment stocks to buy according to analysts, we used the Finviz stock screener and our previous articles. Using these two sources we aggregated an initial list of entertainment stocks sorted by their market capitalization. Next, we checked analysts’ upside potential for each stock and shortlisted stocks with an analyst upside potential of at least 25%. Lastly, we ranked our stocks in ascending order of the analysts’ upside potential. We have also added the number of hedge funds holding each stock sourced from Insider Monkey’s Q3 2024 database. Please note that the data was collected on December 13, 2024.
Why do we care about what hedge funds do? 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).
Gaia, Inc. (NASDAQ:GAIA)
Analysts’ Upside Potential: 38.89%
Number of Hedge Funds: 4
Gaia, Inc. (NASDAQ:GAIA) is a media entertainment and community company that operates a global video streaming service. It focuses on providing content related to personal growth, wellness, and alternative healing. The company serves members in approximately 185 countries and offers content in multiple languages, including English, Spanish, French, and German.
During its fiscal third quarter 2024 earnings call management announced a partnership with ElevenLabs, who will be Gaia, Inc.’s (NASDAQ:GAIA) official AI partner to provide dubbing and translation services across various languages. Management sees this as an opportunity to boost its engagement internationally. The company is already growing its user base substantially as members count increased 7% year-over-year during the third quarter to reach 846,000.
The increased member count topped with an increase of $2 in subscription fees for all members led its revenue to grow 10% year-over-year. Gaia, Inc. (NASDAQ:GAIA) generated $22.2 million in revenue and also marked the sixth consecutive quarter of positive operating and free cash flow. Management remains confident of an even better next quarter due to the increased subscription fees. It expects that even if its customer base remains flat the fourth quarter revenue can hit at least $24 million.
Artko Capital stated the following regarding Gaia, Inc. (NASDAQ:GAIA) in its fourth quarter 2023 investor letter:
“As discussed in our 2Q23 Partner Letter, we sold the remainder of our original 8-year-old position in Gaia, Inc. (NASDAQ:GAIA). While we still made substantial returns in our initial investment, with multiple position reduction sales above $10.00, in recent years, the position has been a significant detractor from performance. The expected fundamentals did not materialize, and key management departures led us to deploy the capital into other positions.”
Overall, GAIA ranks 6th on our list of best entertainment stocks to buy according to analysts. While we acknowledge the potential of GAIA to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GAIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
