Key Takeaways
- The Zacks Media Conglomerates industry is flourishing, driven by the consumer shift toward over-the-top (OTT) content.
- Major players like Sphere Entertainment Co., Lionsgate Studios Corp., and Madison Square Garden Entertainment Corp. are investing in original content to captivate and retain Gen Z and millennial subscribers.
- The industry faces challenges such as declining broadcast TV ratings, reduced demand for home entertainment versions of theatrical releases, and increasing cord-cutting trends.
- The Zacks Media Conglomerates industry has underperformed the broader Zacks Consumer Discretionary sector and the S&P 500 composite over the past year.
- Three media stocks to buy are Sphere Entertainment Co., Lionsgate Studios Corp., and Madison Square Garden Entertainment Corp.
Introduction to the Media Industry
The Zacks Media Conglomerates industry is thriving, driven by the consumer shift toward over-the-top (OTT) content. This shift has led to a surge in demand for original content, with major players like Sphere Entertainment Co., Lionsgate Studios Corp., and Madison Square Garden Entertainment Corp. aggressively investing in developing original music, shows, and fresh content to captivate and retain Gen Z and millennial subscribers. The industry’s prospects are also bolstered by the availability of cost-effective alternative packages, such as skinny bundles, designed to entice consumers with lower prices compared to traditional offerings.
Industry Description
The Zacks Media Conglomerates industry encompasses companies engaged in creating and distributing various content forms, from entertainment to educational materials. These firms also offer travel and consumer products. The industry is adapting to the shift toward OTT content, both subscription-based and ad-supported. Advertising remains a key revenue source, while the metaverse presents new opportunities. Subscription price increases, driven by growing subscriber numbers, offer potential revenue growth. However, the industry faces challenges that include declining broadcast TV ratings, reduced demand for home entertainment versions of theatrical releases, and increasing cord-cutting trends.
Trends Shaping the Future of the Media Industry
Three trends are shaping the future of the media industry. Firstly, original content is driving growth, with media companies’ capacity to generate advertising revenues beyond traditional TV platforms unlocking increased opportunities for targeted advertising. Secondly, high-speed internet demand is acting as a key catalyst, with the burgeoning demand for high-speed internet, including broadband, benefiting media industry participants. Finally, cord-cutting and the matured pay-TV industry are hurting prospects, with the media television industry undergoing a rapid evolution of distribution platforms, embracing new players and advanced technologies.
Zacks Industry Rank and Prospects
The Zacks Media Conglomerates industry is housed within the broader Zacks Consumer Discretionary sector and carries a Zacks Industry Rank #93, which places it in the top 38% of more than 245 Zacks industries. The group’s Zacks Industry Rank indicates continued outperformance in the near term, with our research showing that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.
Industry Performance and Valuation
The Zacks Media Conglomerates industry has underperformed the broader Zacks Consumer Discretionary sector and the S&P 500 composite over the past year, declining 1.4% in the above-mentioned period. The industry is currently trading at 1.52X compared with the S&P 500’s 6.08X and the sector’s 2.39X, based on the trailing 12-month P/S. Over the past five years, the industry has traded as high as 2.93X and as low as 1.15X, with a median of 1.52X.
Three Media Stocks to Buy
Three media stocks to buy are Sphere Entertainment Co., Lionsgate Studios Corp., and Madison Square Garden Entertainment Corp. Sphere Entertainment Co. presents compelling investment potential for 2026, driven by multiple growth catalysts, including the success of The Wizard of Oz Experience and strategic partnerships. Lionsgate Studios Corp. is benefiting from strategic initiatives that position the company for robust growth, including an exclusive partnership with FreeWheel and a strong content library. Madison Square Garden Entertainment Corp. continues building momentum backed by strong financial performance and strategic positioning, including a record-breaking Christmas Spectacular and a partnership with Cisco.
Conclusion
In conclusion, the Zacks Media Conglomerates industry is flourishing, driven by the consumer shift toward OTT content. While the industry faces challenges, major players are investing in original content to captivate and retain subscribers. The Zacks Industry Rank indicates continued outperformance in the near term, and three media stocks to buy are Sphere Entertainment Co., Lionsgate Studios Corp., and Madison Square Garden Entertainment Corp. These stocks present compelling investment potential, driven by multiple growth catalysts, strategic initiatives, and strong financial performance.
