We recently compiled a list of the 10 Best Communication and Media Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where The Walt Disney Company (NYSE:DIS) stands against the other communication and media stocks.
The global telecommunications industry faces significant growth challenges amidst increasing demand for its essential services. Driven primarily by video traffic, global data consumption across telecom networks is expected to nearly triple by 2027. However, providers are experiencing limited pricing power in commoditized connectivity and data services, with internet access revenues projected to grow modestly at a 4% compound annual growth rate (CAGR) to reach $921.6 billion by 2027. Meanwhile, telecommunications companies (telcos) face substantial costs as they invest heavily in infrastructure to support 5G and other emerging technologies, with an estimated $342.1 billion investment forecasted for 2027 alone. These insights are highlighted in PwC’s inaugural Global Telecom Outlook, which underscores the strategic imperatives for telcos to sustain growth in a competitive landscape. Alongside traditional cost-cutting and optimization efforts, telcos are advised to explore growth opportunities such as IoT solutions, private 5G networks for businesses, fixed wireless broadband for households, and tailored digital infrastructure services for sectors like entertainment, healthcare, manufacturing, and mobility. Embracing these growth areas requires telcos to collaborate effectively within broader ecosystems that are reshaping the industry.
In the business-to-consumer (B2C) sector, telecommunications companies (telcos) are experiencing heightened demand driven by evolving user preferences, particularly as new devices with increasingly data-intensive requirements emerge, largely fueled by video content. By 2027, of the projected 9.7 million petabytes (PB) of data consumption, nearly 7.7 million PB (79%) will be attributed to digitized video content, surpassing all other categories combined. Over the same period, data consumption from traditional communications has grown 104% from 2018 to 2022 due in part to pandemic-related factors, but is expected to increase only 26.8% through 2027. Games represent another significant growth area, with data consumption associated with gaming projected to grow at a 21% compound annual growth rate (CAGR) from 2022 to 2027, driven by the shift towards online and cloud gaming. Virtual reality (VR), fueled by the expansion of the metaverse, is also on the rise, with an anticipated 43% CAGR in VR data consumption over the next five years, accounting for 5% of total data consumption by 2027.
Despite technological advancements and increasing competition, the price of data is declining, impacting internet access revenues which are expected to grow at a modest 4% CAGR to reach $921.6 billion by 2027 from $757.7 billion in 2022, closely tracking global GDP growth. Cellular data is forecasted to be the fastest-growing category, with a 27% CAGR from 2022 to 2027, driven by significant variations in data consumption patterns across regions. In North America, cellular data is projected to comprise 6% of all data traffic, compared to 30% in Asia, particularly influenced by developments in India where the rollout of 5G is expected to catalyze service innovation and subscriber growth, potentially reaching 300 million to 350 million 5G subscribers by 2026. Telecom giants such as Reliance Jio and Bharti Airtel are poised to capitalize on this opportunity by fostering a robust gaming ecosystem and expanding into sectors like healthcare.
Our Methodology
We leveraged Insider Monkey’s comprehensive database of 920 prominent hedge funds to identify the top 10 media and communications stocks with the highest level of hedge fund investment as of Q1 2024. These stocks are listed in order of increasing hedge fund ownership, providing insight into the most popular communication and media stocks among elite investors.
A packed theater of moviegoers watching a blockbuster film produced by the entertainment company.
The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 92
The Walt Disney Company (NYSE:DIS) ranks second on our list of 10 best communication and media ttocks to buy according to hedge funds. On June 25, Goldman Sachs initiated coverage on The Walt Disney Company (NYSE:DIS), assigning a Buy rating to the entertainment powerhouse’s stock and setting a price target of $125 per share. Analysts at the firm highlight The Walt Disney Company (NYSE:DIS) robust content pipeline as a critical factor driving potential growth in the mid-term. In its latest quarterly earnings report announced on May 7, The Walt Disney Company (NYSE:DIS) reported a normalized earnings per share of $1.21, exceeding expectations by $0.11. The company posted revenue of $22.08 billion, which fell short of forecasts by $60.06 million.
During Q1, 2024 the count of hedge funds holding positions in The Walt Disney Company (NYSE:DIS) rose to 92 from 89 in the prior quarter, as reported by Insider Monkey’s database encompassing 920 hedge funds. These holdings collectively amount to around $8.45 billion. Nelson Peltz’s Trian Partners emerged as the leading shareholder among these hedge funds during this timeframe.
Mar Vista Focus strategy stated the following regarding The Walt Disney Company (NYSE:DIS) in its first quarter 2024 investor letter:
“The Walt Disney Company’s (NYSE:DIS) latest financial results displayed considerable progress, leading to an increase in stock price. The most noteworthy factor was the improved performance of its streaming business. With media profitability recovering, management is optimistically guiding for 20% earnings growth in 2024. This positive outlook is also supported by lower costs and robust performance from its parks division.
Walt Disney’s streaming service is on track to become profitable by its fiscal fourth quarter. This aligns with our original investment thesis, which expected the direct-to-consumer (DTC) business to move from a loss of $2 billion to a profit of $1 billion. Even after the recent stock price increase, Walt Disney remains undervalued relative to Netflix. We expect this gap to shrink as its streaming business matures and becomes increasingly profitable over the next few years.”
Overall DIS ranks 2nd on our list of the best communication and media stocks to buy. You can visit 10 Best Communication and Media Stocks To Buy According to Hedge Funds to see the other communication and media stocks that are on hedge funds’ radar. 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 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.