It’s hard to be a value investor in the media scene these days, with many of the top content creators now facing significant headwinds as they look to keep investing in their streaming futures. Undoubtedly, not every media company can become a Netflix (NASDAQ:NFLX). The streaming pioneer may have led the media darlings into the streaming waters, but thus far, there haven’t been all that many fish for some of the latecomers.
Does that mean the fish won’t re-appear as consumers become more willing to pay up for more binge-worthy content?
Only time will tell, but with inflation’s impact likely to continue to incentive cost-cutting, I find it not only tougher to grow in video streaming, but I also think the “cutting the cord” trend seen in cable may just hit the streaming platform if it hasn’t already.
If you’re not put off by the harsh media industry dynamics, perhaps there’s serious value for those willing to wait things out. With revamped streaming spending plans, maybe it won’t take a miracle for these media stocks to buy to turn things around.
Disney (DIS)
Disney (NYSE:DIS) stock recently fell 10% following a tough round of quarterly earnings. With shares now down over 13% from their 52-week highs, investors who cherish the brand may have another chance to bet on the magical kingdom’s turnaround.
It will not be a quick or easy comeback, but I do think big changes will eventually make a difference for the stock. Further, the recent post-earnings flop seems mostly overdone. Indeed, it’s not hard to imagine many DIS stockholders were chasing quick gains from early turnaround efforts.
Either way, I think there’s no denying that the $193 billion media juggernaut has a deep enough IP library to help it gain ground after spending almost 10 years stagnating. As the fundamentals hold steady while Bob Iger looks to make Disney+, the company’s streaming platform, a profitable grower, perhaps the latest slip is worthy of a mouse-sized nibble.
At this pace, Disney may not need a miracle as much as it needs investor patience.
Sony Group (SONY)
Sony Group (NYSE:SONY) is a Japanese juggernaut that’s seen its stock fall under serious pressure in recent months, now down over 18% year to date. Stress in the media industry represents just one of a handful of sore spots the firm has had to grapple with lately. Perhaps some smart deal-making could help the firm bolster its standing over the long term.
Reportedly, Sony Pictures and Apollo Global Management (NYSE:APO) were in talks to acquire ailing media firm Paramount (NYSE:PARA) — a firm Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) recently announced it had completely sold out of. Such a major move would likely result in significant changes, with parts of the business, including CBS, broken off and sold.
As Sony and Apollo look to “gut” the hard-hit, legacy media firm, it will be interesting to see how much value can be extracted by the two acquirers. Given how much damage has been done to PARA stock already, I wouldn’t be surprised if Sony ends up walking away with a pretty good deal.
Only time will tell which firm(s) ultimately buys up Paramount’s assets and how steep the price tag will be. Either way, I like Sony’s chances and what it stands to gain, as it seeks to deepen its content library and presence in Hollywood.
Of course, Sony Pictures is just a small piece of the overall revenue pie, but I do like that Sony is in deal-making mode while the industry is in a historic funk. It’s the smart thing to do for the deep-pocketed giant. At 18.3 times trailing price-to-earnings (P/E), SONY stock also looks really cheap.
Comcast (CMCSA)
Comcast (NASDAQ:CMCSA) stock has also had that sinking feeling, now down over 9% year to date. Things could have certainly been way worse amid some rough industry headwinds, with CMCSA stock down around 33% from its 2021 all-time highs. With a fresh price hike (of around $2) for its Peacock streaming plans likely looming, perhaps the media giant will have the means to end its spill as soon as this summer.
Undoubtedly, the 2024 Paris Olympics could be a big deal for many firms spanning numerous industries, from media to apparel. Peacock won’t just be a place to stream the big games, it’ll be a place to enjoy truly interactive experiences.
Personally, I think interactive features made possible with Peacock could change the Olympics-viewing experience forever. With so many Olympic events that cable TV simply can’t keep up with, I’d argue the big event was made for interactive streaming.
With a decent amount of momentum (3 million subscribers added in the first quarter for Peacock) and a timely catalyst in the Olympics, I’d not dare bet against the dirt-cheap media stock right here — not while it’s going for just 10.5 times trailing P/E.
On the date of publication, Joey Frenette held shares of Berkshire Hathaway (Class B) and Disney. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
