During the stay @ home phase of the coronavirus Netflix was all the rage for entertainment. That explains why the stock did so well as the bear market mauled most every other stock including many of the stocks we are featuring today: Comcast Corporation (CMCSA), Walt Disney Company (DIS), IMAX Corporation (IMAX) and AMC Entertainment Holdings (AMC).
Now it is time to turn the page where consumers will start leaving their homes and getting back to something akin to normal. As that happens they will certainly want more entertainment and that means a return to the movies.
It won’t happen all at once, but surely over time these companies will see a return to growth and improving share price. So do consider purchasing shares at current levels or on future dips for the long term gains that should unfold.
Walt Disney Company (DIS)
Streaming video services are all the rage these days, as evidenced by the meteoric rise of NFLX. However, NFLX is not the only game in town. DIS is also bringing in a slew of new business thanks to its popular online streaming service. Nearly 55 million people have subscribed to Disney Plus in less than six months.
Though DIS theme parks are temporarily closed due to the CoVid-19 outbreak, it is only a matter of time until these parks reopen. It appears as though the investment community might have overreacted by selling DIS stock in unison with the seemingly never-ending string of negative news stories pertaining to the entertainment giant during the pandemic.
DIS traded at $140 on February 20. Today, the stock trades around $100. Disney’s streaming service success has not made up for lost revenue at the gates yet the popularity of the company’s online content certainly sets the stage for future success. In fact, the high end of TipRanks’ analyst forecasts for DIS is an incredible $168. Bet against this entertainment conglomerate at your own peril.
Comcast Corporation (CMCSA)
Stocks with exposure to the movie theater industry have been beaten down amidst the coronavirus pandemic. This group includes CMCSA. CMCSA provides an array of consumer entertainment services aside from movies, including cable television and communications services.
CMCSA owns NBC Universal, meaning the company’s success is partially tied to that of movie-maker Universal Studios. Though Universal Studios is on temporary hiatus due to the pandemic, temporary is the operative word. There are rumblings Universal will partner with Tom Cruise and Elon Musk to produce a movie filmed on the International Space Station.
Though consumers are still cutting the cord, this trend will not completely decimate CMCSA’s revenue as the company generates income from sources aside from cable TV. CMCSA generated nearly $27 billion in revenue in the first quarter of 2020 alone, with income stemming from:
- High-speed internet service
- Cable TV
- Communication services
- Other business divisions
In other words, CMCSA has its hands in plenty off consumer spending pies. With a POWR Rating Industry Grade of B, there is a good chance CMCSA will move toward TipRanks’ average analyst price target of $43.31 as 2020 progresses.
IMAX Corporation (IMAX)
Put yourself in the position of the average consumer who has been cooped up in his or her home for the past several months, staring at small-to-medium sized screens 8 to 14 hours per day. You want to get out of your home and watch something aside from sitcom reruns, decades-old sporting events and Netflix.
The massive IMAX screens are quite appealing as they provide an opportunity to take in brand new entertainment in the presence of friends, family and the general public. Though IMAX stock has tumbled from $25 in May of 2019 to its current price of $11.36, it is worth investors’ attention. The masses are likely to segue from their comparably small in-home screens to the gargantuan IMAX screens in the months to come simply because the coronavirus-induced quarantine is coming to an end.
Take a look at IMAX on TipRanks and you will find 5 “Buy” recommendations, 2 “Holds” and zero “Sells”. Furthermore, IMAX has a strong POWR Rating Peer Grade of B. The average analyst price target for Imax is in excess of $16.
As detailed in this insightful Motley Fool write-up, IMAX is a growing company with a healthy balance sheet. Roll the dice on IMAX and this “dead cat” just might bounce for you as we break quarantine.
AMC Entertainment Holdings (AMC)
Though it is quite trendy to insist movie theaters are dead and never coming back, this sentiment could not be further from the truth. The alternative to going to the movies at brick-and-mortar theaters is unappealing prospect of shelling out $19.99 to watch a movie on your TV at home.
People will soon be looking for excuses to get out of the house after an extended quarantine. Furthermore, a movie ticket is cheaper than $19.99 in most cities, especially if it is a matinee showing. This means the likes of AMC stand to benefit from the masses’ return to movie theaters.
AMC was trading at $15 last May. The stock dipped down to near the $2 mark in April and now trades around $4. The fact that AMC skyrocketed 55% in April alone means this stock has ample support at a floor of $2 to $3. The fact that AMC will no longer show Universal films in its theaters is not a stock-killer.
The moral of this story is people will soon be looking for reasons to go outside and get away from the comparably small screens at home. Consumers will be more than happy to pay $10 – $15 to see non-Universal movies at AMC theaters’ silver screens rather than pay $19.99 to watch a flick at home.
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DIS shares rose $1.12 (+1.11%) in premarket trading Thursday. Year-to-date, DIS has declined -29.48%, versus a -9.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…
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