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After a long day and hectic earnings season, ditching dual monitors and watching a movie on the big screen is a nice way to unwind.But Volatility May Come In This Space Hollywood Writers Strike, Paramount Global (for), and Netflix’s cost cuts (NFL).
get your popcorn ready
Wall Street Horizon is known for monitoring market-moving earnings event dates, corporate meetings, and many other event types, but one of our personal favorites is the movie releases category. Ahead of the summer box office period and the unofficial kickoff of the season (Memorial Day weekend), let’s take a look back at the state of the movie industry. You might just find the catalyst to add some glitz and glamor to your portfolio.
Box office sales continue to improve
to get This year’s box office totals continue to build off pandemic lows, according to IMDb. As 2020 started as usual in the US, the industry stalled in mid-March of that year and did not recover until mid-2021. Over the past two years — despite the Omicron variant being discontinued early last year — more and more people have watched movies on movie night. Compared with the same period last year, the year-to-date box office revenue in 2023 has increased by 28%. Granted, inflation was a bit high during that time, but it’s still a high total. However, overall spending was still down 26% (not adjusted for inflation) compared to pre-COVID amounts in 2019.
2023 box office numbers better, but still lagging pre-pandemic totals
movie database
So, which filmmaker stole the show? As you might have guessed, Netflix is in the spotlight, releasing 45 titles from late May through Labor Day weekend. NFLX shares rose in recent days after announcing its new ad tier to boost revenue. Disney (Insurance) and Comcast (China-America Chamber of Commerce) are the far and away second and third places in the number of movies.
Netflix leads summer movie releases
Source: Wall Street Horizon
Shift in services spending helps entertainment companies
NFLX is undoubtedly the star of the show, but shares are up just 15% this year. Lionsgate Entertainment (LGF.A) has been “Best Actor” in 2023 (bear for the puns). LGF.A has returned 91% year-to-date. More broadly, the communications services industry — which houses most of these companies — has overtaken the information technology industry as the best-performing sector in the S&P 500 this year.
Consumer discretionary, of which arguably going to the movies might fall, was also a blockbuster for the sector — up more than 16% through mid-May. Whether Summer will be a comedy or a tragedy for the group remains to be seen, but without Paramount Global, the group has strong momentum.
Broad Gains for Filmmaker Stocks
Source: Stock Charts
record
Ahead of its unofficial summer launch, JPMorgan (JPMorgan) will host the 51st annual TMT Global Technology, Media & Communications Conference Monday through Wednesday this week. Disney, Comcast, and Warner Bros. Discovery (world bank day), among others, is expected to appear. Investors should continue to pay attention to possible industry-moving news during the event.
After that, the next key event is Lions Gate’s fourth-quarter 2023 earnings report, which was confirmed by AMC on Thursday, May 25. Ahead of Netflix’s second-quarter profit report on July 18 and a series of EPS reports later that month and early August, three filmmakers hold their annual shareholder meetings: Netflix on June 1, Comcast on June 7 and Sony (sony) June 20.
Upcoming Attractions: Spinoffs
Speaking of Sony, one of the broader trends we’ve noticed is another uptick in spinoffs — the Tokyo-based consumer electronics company is reportedly considering spinning off its financial services division. Alibaba (Baba) is another consumer name for playing spinoffs – stay tuned for more of our coverage of this trend.
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Will entertainment companies continue to be profitable? As consumer spending trends ebb and flow like suspenseful thrillers for economic data watchers, uncertainty is high in this group of stocks; be sure to monitor key events to see how the script plays out.
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