Showbiz shares, which were at a high in February before being walloped by COVID-19, have a lot going for them just now, said one Wall Street analyst Monday, heralding the upcoming return of film and TV production and sports, an improved ad outlook and theme parks reopening as reasons to be bullish on the stocks.
Over the past few weeks, media shares have joined a market rally driven by reopening and positive sentiment but are still underperforming the broader indexes since coronavirus hit, said Michael Morris of Guggenheim Partners. He’s cautious long term too but thinks investor focusing on cord cutting and declining live ratings are missing the potential for a strong rebound
“We see potential for additional outperformance in the coming weeks as consumer activity and airing of live sporting events ramp. We expect improving advertiser sentiment, re-opening of small- and medium-sized businesses that subscribe to channel bundles and gradual improvement in content production and theme park attendance to support positive sentiment,” Morris wrote in a note to investors. “We believe overall expectations for economic health as reflected in the broader market rebound remains under-appreciated in media shares over the same period.” He particularly likes Fox and ViacomCBS stock.
Media executives on first-quarter earnings calls last month warned of a steep advertising trough in the current second quarter, but a sprinkling of companies have indicated improved sentiment over the past several weeks.
On sports, Morris said major-media sports leadership appears optimistic, particularly regarding professional and college football, that the fall slate will be uniquely crowded with must-see events. Football dates are not yet clear, he noted, but the NCAA has approved a return to campus for voluntary athlete workouts, Meanwhile, the NBA plans to resume games among 22 playoff eligible teams on July 31 and the NHL’s return to training camp is estimated for early July.
The Universal Orland theme park opened Friday. the Magic Kingdom and Animal Kingdom at Walt Disney World will reopen July 11. Meanwhile, Disney opened up the Disney Springs retail and dining areas next to the park last month and will begin opening its resort hotels on June 22. Shanghai Disneyland opened in May and a Hong Kong official indicated today that Disneyland will be opening there shortly.
Los Angeles has said film and television studios can reopen June 12. While there are questions regarding how and how quickly production will ramp up, “A return to content production should support underlying confidence in media economics,” said Morris.
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