While AMC Entertainment (NYSE:AMC) stock was once the epitome of a strong entertainment stock thanks to “meme mania,” lately it has lost its appeal for investors. Looking ahead to 2024, you may be looking at alternative options for entertainment stocks.
Like most stocks, it’s important to consider those representing companies with sound fundamentals and robust growth outlooks. In particular, content-focused entertainment stocks present an attractive risk/reward profile. They’ve suffered low valuations due to concerns about “cord cutting” and the decline of linear television. As a result, even a modest improvement in operating results could drive them to higher prices. Let’s take a look together at three options that make my list of best entertainment stocks.
Disney (DIS)
Disney’s (NYSE:DIS) stock, now at $80, faced a 24% drop in the last 12 months and a 30% decline in five years. The legendary company may hold iconic properties including Star Wars and Marvel, but their share price has stagnated for nearly a decade. Notably, DIS stock plummeted 60% from its 2021 peak. CEO Bob Iger’s efforts to revive Disney through cost-cutting and layoffs haven’t fully addressed challenges like selling legacy TV stations, determining Hulu’s ownership with Comcast, and dealing with a global Hollywood strike.
All its challenges considered, Disney displayed positive signals. The company reported robust profit growth in Q4 with net income surging 63% to $264 million and revenue rising 5% to $21.24 billion. Additionally, Disney+ leverages Disney’s rich intellectual property, providing subscribers with a diverse content library including fan favorites from timeless animated classics to Pixar films, Marvel sagas, and Star Wars narratives.
Disney’s adeptness in transitioning from traditional TV to streaming is evident in the success of Disney+. The company’s strategic emphasis on direct-to-consumer (DTC) services aims for profitability in this segment by the end of fiscal 2024 and positions Disney for sustained growth in the digital entertainment realm.
Take-Two Interactive (TTWO)
Despite a significant run this year, Take-Two Interactive (NASDAQ:TTWO) stock only rose 8% since 2018 and remains 30% below its 2022 peak. Known for major franchises like Grand Theft Auto and Red Dead Redemption, Take-Two Interactive faced challenges from the broader tech downturn in 2022 and costly acquisitions. This included the $12.7 billion Zynga takeover, which led to a $1.2 billion net loss in 2022. Despite these setbacks, analysts predict a 10% potential increase in TTWO stock, indicating potential improvement in its financial outlook.
Rockstar Games president, Sam Houser, announced on X that the first trailer for the next Grand Theft Auto (GTA VI) would release in early December, coinciding with the studio’s 25th anniversary. Take-Two suggested a potential 2024 launch, aiming for significant success in fiscal 2025.
Anticipated before launch, analysts predicted over $1 billion with 25 million copies sold initially. CEO Strauss Zelnick aims for $8 billion in net bookings and $1 billion in operating cash flow by fiscal 2025. Recently, JP Morgan increased its target to $165, citing robust and stronger fiscal 2025 guidance.
Netflix (NFLX)
Netflix (NASDAQ:NFLX) shone in its recent earnings report, surpassing 15 million subscribers for its ad-supported tier. With over 9 million new subscribers, the streaming giant embraces ad-supported revenue, anticipating premium subscribers to transition, providing stable revenue for content development costs.
Utilizing artificial intelligence (AI) and machine learning, Netflix analyzes extensive viewer data, providing personalized recommendations based on the preferences of over 247 million subscribers. This dynamic approach ensures real-time, diverse top 10 lists and optimizes thumbnail selections, enhancing user engagement. In a new move, Netflix plans to reward “binge watchers” on the ad-supported plan by reducing the number of ads shown. Users watching three consecutive episodes with ads will be granted one ad-free episode.
Notably, NFLX stock experienced a pullback since mid-summer but still rose 39% for the year. Despite the correction, the recent bounce after the company’s earnings suggests a potential opportunity, making it an appealing choice for investors seeking holiday cheer.
On the date of publication, Chris MacDonald has a LONG position in DIS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
