Roku was a champ. Lionsgate surged and Netflix jumped. Tech shares went bananas in 2023. Huge media shares had a combined yr of transition dominated by Hollywood strikes with linear tv declines and streaming losses.
Paramount fell. Disney and Fox have been principally flat on the yr. Giants Comcast and Sony, which each produce other companies like broadband or video games and music, each had good runs. Warner Bros Discovery gained a bit. All are pushing for profitability in streaming and progress there’ll affect how the shares carry out in 2024.
Comparatively talking, 2023 was an actual bonanza in contrast with a very dismal 2022 when solely two – that’s two – media shares rose for the yr: WWE (now a part of TKO Group) and Nexstar.
It was a surprisingly good 2023 for shares total with the S&P 500 closing up greater than 24% for the yr. Traders shrugged off excessive rates of interest and inflation, recession fears, threats of a authorities shutdown, a quick banking disaster and worldwide strife, turning round a yr initially anticipated to be fairly glum for markets.
Tech particularly introduced the warmth, fueled largely by an AI frenzy. The well-known FAANG group of shares — Fb (now Meta), Amazon, Apple, Netflix and Google (now Alphabet) — has morphed into The Magnificent Seven. Newly coined this yr by an analyst (from the film), it’s Alphabet, Amazon, Apple, Meta, Microsoft, Invidia and Tesla. This gang contributed considerably to total positive factors. Shares of adjoining tech from Snap to Spotify additionally rallied.
Exhibitors have been break up to decrease amid angst at 2024’s field workplace prospects. Broadcast shares fell, with promoting tender however set for a political tsunami.
And the yr yr wrapped with a flourish of M&A chatter that hasn’t but however may additionally buoy shares in 2024. It doesn’t harm that the Federal Reserve indicated it could lastly lower rates of interest in 2024 after 11 hikes during the last two years.
A Nearer Look
Roku was king of media in 2023, up 119%.
Bear in mind again in March when the corporate worriedly introduced that it had 1 / 4 of its money at Silicon Valley Financial institution, which worn out within the largest financial institution collapse since 2008. Catastrophe was averted when the FDIC agreed to totally assure all deposits and Roku took it from there. The enterprise is benefitting as tv advert {dollars} shift from linear to digital, because it expands abroad and because it sells plenty of branded Sensible TVs. Could also be a possible takeover goal.
Disney, the one showbiz inventory within the 30-member DJIA, nosed up barely for the yr. That’s properly off its excessive for the yr of $110 in January, when the market was flushed with enthusiasm at CEO Bob Iger’s return. However these are difficult instances with linear tv in regular decline, streaming nonetheless within the crimson and Disney going through a string of field workplace underachievers.
Iger notably acquired the remainder of Hulu from Comcast, paying a beforehand agreed upon $8.6 billion minimal. It might owe extra as each side have groups working to determine a valuation. He’s waffled a bit on entertaining affords for ABC and linear networks and is searching for a strategic associate for ESPN forward of an eventual streaming launch. Disney is reportedly doing a cope with Reliance for its property in India.
Wall Streeters hope the brand new yr will carry an replace on succession planning, and maybe on an NBA contract renewal. One analyst says he’s been getting plenty of shopper calls on Disney just lately. “They’ll say issues like, ‘I used to personal Disney. I simply really feel prefer it may very well be an fascinating inventory. There are such a lot of shifting components proper now, may you simply get me in control?’”
It appears like the corporate will enter 2024 going through a proxy battle with activist investor Nelson Peltz, who desires two seats on the board — for himself and former Disney CFO Jay Rasulo. Peltz launched the same adversarial marketing campaign final yr however backed off in February earlier than a showdown on the annual assembly.
Warner Bros Discovery is up about 10% however off its excessive and from the $24 it traded at when Discovery and Warner Media merged in April 2022. CEO David Zaslav is concentrated on boosting money movement and paying down the corporate’s large debt, which stood at $45.3 billion on the finish of the September quarter. Traders didn’t love that quarter, spooked particularly by a glum promoting outlook.
The advert market appears to have entered a brand new part not helpful for legacy media, which is the lack of pricing energy, says one analyst. “Traditionally, as linear TV audiences shrunk, huge firms may offset that by elevating the costs they charged advertisers for the remaining viewers. Within the final yr, that recreation appears to have failed,” until it’s sports activities.
With the April 8 two-year anniversary of the Discovery-Warner Media merger, WBD can discover offers with out a huge tax penalty. Zaslav has had conversations with Paramount’s controlling shareholder Shari Redstone and CEO Bob Bakish a couple of doable deal. Warners is also a vendor however that’s arduous too, partly resulting from its enormous steady of legacy cable networks.
Warner Bros Studio and HBO “are good companies with strong inventive trajectories, and, to us, the center of the corporate,” stated one analyst.
Paramount World, in the meantime, fell 17%. It’s financially squeezed so seen as likeliest to do a deal sooner fairly than later. Conversations with Zaslav in addition to with Skydance Media CEO David Ellison have touched on each an outright sale in addition to the potential of Redstone promoting her curiosity in NAI, the household holding firm that homes her Paramount inventory. Common Paramount shareholders wouldn’t be getting any premium for his or her shares in that state of affairs, perhaps one motive deal discuss has not moved the needle on the inventory. Skydance wouldn’t face regulatory hurdles.
Amongst huge cap leisure shares, Netflix gained 63%. Studios are newly prepared to license reveals. It has stronger steadiness sheet than most of massive media and a bigger backlog of unreleased content material of anybody however Disney, all of it devoted to streaming. It has added an promoting tier and is seeing upside from a crackdown on password sharing.
Smaller Lionsgate had a implausible run, up a whopping 88% because it ended the yr closing the acquisition of eOne from Hasbro and asserting plans to mix the studio with a SPAC early subsequent yr in a separation from Starz that it hopes will unlock worth.
Fox remains to be properly appreciated by some analysts — no streaming losses and a give attention to reside sports activities and information. However buyers like progress and a few marvel in regards to the finish recreation. “It simply is what it’s,” stated one. With linear tv shrinking and the price of sports activities rights rising, “What’s the narrative?”
Fox is going through a $2.7 billion defamation lawsuit by a second voting machine firm, Smartmatic. Earlier this yr, it agreed to an $800 million settlement simply earlier than trial in a primary swimsuit introduced by Dominion Voting Techniques.
In exhibition, the movie show gig remains to be a tricky one and the strikes disrupted manufacturing, pushing some huge movies again, which is able to sluggish the tempo of recent launch in 2024. Cinema shares ended the yr combined, with Cinemark – the No. 3 chain — exhibiting sharp positive factors. The worlds’ largest exhibitor AMC Leisure plunged, however analysts don’t thoughts. It’s “lastly buying and selling roughly consistent with its pre-meme historic a number of,” stated one.
