We recently compiled a list of the 7 Best Entertainment Stocks To Buy According to Analysts. In this article, we are going to take a look at where The Walt Disney Company (NYSE:DIS) stands against the other 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).
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.
Overall DIS ranks 7th on our list of the Best Entertainment Stocks To Buy According to Analysts. While we acknowledge the potential of DIS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DIS, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
