Zacks Industry Outlook Highlights Warner Music, News Corporation, Lions Gate and IMAX

For Immediate ReleaseChicago, IL – December 3, 2024 – Today, Zacks Equity Research discusses Warner Music Group WMG, News Corporation NWSA, Lions Gate Entertainment (LGF.A) and IMAX Corp. IMAX.Industry: Film and TVLink: https://www.zacks.com/commentary/2377510/4-film-television-production-stocks-to-watch-amid-dull-industry-trendsThe Zacks Film and Television Production and Distribution industry is witnessing a surge in demand for digital entertainment due to operational constraints faced by movie theaters, theme parks and cruise lines. This increased consumption of online media, music and news, driven by the work-and-learn-from-home trend, has been a boon for industry players like Warner Music Group, News Corporation, Lions Gate Entertainment and IMAX Corp.However, as more players enter the field, content costs are skyrocketing, putting pressure on profitability. This trend is forcing companies to spend heavily on original programming and exclusive rights to attract and retain viewers, which can strain financial resources and impact stock performance.Industry DescriptionThe Zacks Film and Television Production and Distribution industry encompasses companies engaged in the creation, distribution and exhibition of film and television content. The core activities revolve around producing entertainment for theaters, television networks, video-on-demand platforms, streaming services and other outlets that showcase such works.A notable company like Imax specializes in advanced motion picture technologies and immersive presentation experiences. Industry participants are involved in the production and dissemination of movies destined for theatrical releases and direct-to-video markets, as well as television programming. The financial performance of these entities hinges greatly on the global box office success of their films, coupled with the number of new releases and the viewership ratings garnered by their television shows.3 Film and Television Production Industry Trends in FocusOver-the-Top Services Gain Prominence: Content creators are increasingly distributing through over-the-top (OTT) streaming services to capitalize on the popularity of their franchises. Their aim is to provide exclusive content and a differentiated viewing experience. However, streaming companies themselves are producing more original, award-winning programming to reduce licensing costs and reliance on third-party providers, which could undermine traditional content distribution strategies.Binge-Watching Drives Consumption: Phenomena like binge-watching, wider Internet adoption, and advancements in mobile, video and wireless technologies have led consumers to frequently view content on smaller screens. To adapt to these new viewing patterns, industry players are pivoting to digital content distribution.The rise of digital capabilities provides easier access to consumer data, allowing production companies to leverage AI tools for better understanding audience preferences and creating resonant content. However, intense competition from streamers is forcing increased spending on content and marketing, hurting profitability.Technological Advancement Aids Prospects: Exhibitors are adopting highly efficient, cost-effective laser projection systems to enhance image quality and the overall movie experience. Technologies like motion seating, immersive audio, interactive movies, AR and VR are expected to further elevate the viewing experience. Conversely, the growth of alternative distribution channels like home video, pay-per-view, streaming, VOD, Internet and broadcast TV is challenging traditional exhibitors.Zacks Industry Rank Indicates Dull ProspectsThe Zacks Film and Television Production and Distribution industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #149, which places it in the bottom 40% of more than 246 Zacks industries.The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates discouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since Nov. 30, 2023, the industry’s earnings estimate for 2024 has moved down 8.6%.Despite the gloomy industry outlook, a few stocks are worth watching based on a strong earnings outlook. Before we present a few stocks that you may want to consider for your portfolio, let’s takea look at the industry’s recent stock-market performance and valuation picture.Industry Outperforms the Sector, Lags the S&P 500The Zacks Film and Television Production and Distribution industry has outperformed the broader Zacks Consumer Discretionary sector but lagged the S&P 500 composite over the past year.The industry has returned 24.4% in the above-mentioned period compared with the broader sector’s growth of 6.3%. The S&P 500 has risen 32.4% during the same time frame.Industry's Current ValuationOn the basis of the trailing 12-month price-to-sales (P/S), a commonly used multiple for valuing Film and Television Production and Distribution stocks, the industry is currently trading at 2.29X compared with the S&P 500’s 5.75X and the sector’s 2.28X.Over the past five years, the industry has traded as high as 2.52X and as low as 0.92X, recording a median of 1.71X.4 Film & Television Stocks to Watch Right NowWarner Music Group: This Zacks Rank #3 (Hold) company is prospering from continued growth in Recorded Music licensing and Music Publishing synchronization revenues, including income from emerging streaming platforms. Furthermore, ongoing investments in international markets are anticipated to bolster its top line in the near term. Warner Music Group has shifted away from solely relying on celebrity influence and is now strategically targeting various elements of the value chain. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The company has struck a new deal with Meta Platforms, expanding opportunities for artists and songwriters across all their platforms. WMG has acquired Cloud 9 Recordings, a prominent independent label in the Netherlands and also launched MPLIFY, a progressive label dedicated to supporting Korean artists.Warner Music Latina partnered with Street Mob Records, an incubator of new Mexican talent. Warner Chappell Music UK entered into a strategic partnership with British dance label Defected Records. Warner Chappell Music also partnered with Analog Metaverse, a boutique rights management company and music publisherWarner Music Group shares have plunged 9.1% year to date. The Zacks Consensus Estimate for the company’s fiscal 2025 earnings has moved south by 5% to $1.34 per share over the past 30 days.News Corporation: This Zacks Rank #3 company is benefiting from prudent strategic efforts, including the ongoing digital transformation of its business and investments in the Digital Real Estate Services, Dow Jones and Book Publishing segments. News Corporation has been diversifying its revenue streams through strategic acquisitions and operational enhancements. It is optimistic about the acquisitions of the OPIS and Base Chemicals businesses, which are likely to bolster Dow Jones' information services offerings.News Corp. is well-positioned to capitalize on opportunities arising from technology sharing across geographies and businesses, as well as bundled offerings of enriched content to consumers and advertising partners. Robust momentum in the Digital Real Estate Services segment, driven by higher Australian residential revenues at REA Group, is expected to fuel top-line growth in the upcoming quarters.News Corp. shares have gained 19.6% year to date. The Zacks Consensus Estimate for the company’s fiscal 2025 earnings has moved north by 1.2% to 86 cents per share over the past 30 days.Lions Gate Entertainment: This Zacks Rank #3 company is benefiting from strength in its Motion Picture and Media Networks segments. Robust viewership of content across all platforms, coupled with a rising subscriber base, is driving revenues for STARPLAY Domestic. Increasing domestic OTT and global subscriber count are expected to fuel top-line growth in the near term.Lions Gate enjoys a strong pipeline of content on Starz's platforms, boosting viewership and increasing the subscriber base of its OTT offerings. Management has been planning cautious content spending rather than chasing subscribers, therefore focusing on profitability. It will also explore bundling and packaging opportunities going forward.The acquisition of global entertainment platform eOne from Hasbro for $375 million in cash has expanded Lions Gate's library by 6,500 film and television titles. The acquisition has boosted its portfolio of brands and franchises and is expected to strengthen its footprint in Canada and the United Kingdom.Lions Gate shares have lost 24.4% year to date. The Zacks Consensus Estimate for fiscal 2025 earnings has moved south by 42.6% to 39 cents per share over the past 30 days.IMAX: A robust slate of upcoming releases is expected to fuel IMAX's top line in the near term, driven by gross box office collections of local language movies in markets like China, Japan, India and South Korea. Strengthening partnerships with leading multiplex chains in regions, such as France, the Philippines, Turkey and India, presents a significant upside. The flurry of international deals will allow this Zacks Rank #3 company to deliver its premium sight and sound technology to more global audiences and stay relevant as it faces increasing competition from streamed content.The recovery in the pace of theater system installations and higher IMAX maintenance sales are major positive factors. Moreover, a steady cash balance and flexible business model position the company well for expansion and market share gains.The Zacks Consensus Estimate for IMAX’s 2025 earnings has moved north by 10.1% to $1.09 per share over the past 30 days. IMAX shares have risen 75.2% year to date.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report News Corporation (NWSA): Free Stock Analysis Report IMAX Corporation (IMAX): Free Stock Analysis Report Lions Gate Entertainment Corp. (LGF.A): Free Stock Analysis Report Warner Music Group Corp. (WMG): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks