Despite economic challenges, the entertainment industry is growing due to increased tech adoption and enhanced user experiences. Moreover, factors such as widespread internet use, new offerings, and emerging technologies contribute to the industry's long-term potential.
Therefore, adding fundamentally strong entertainment stocks CuriosityStream Inc. (CURI) and Sony Group Corporation (SONY) to one’s watchlist could be wise.
Before diving deeper into their fundamentals, let’s discuss what’s shaping the prospects of the entertainment industry.
Factors like rising content costs, piracy, regulatory challenges, and subscriber turnover influence the entertainment industry. Moreover, the absence of entry barriers fosters intense competition. Even with a 15% increase in U.S. movie ticket prices from pre-pandemic levels in 2023, they remain relatively affordable compared to the other entertainment options.
Notably, box office sales in 2023 surpassed last year's figures by $1 billion, reaching an impressive $5.8 billion by July 30. According to a Markets N Research report, the global movie theater market is projected to grow at a 4.5% CAGR, reaching $92.40 billion by 2030.
The industry adapts to consumer preferences by using digital tools and technology for creativity, flexibility, and cost-effective offerings. Generative AI in the media and entertainment sector is expected to reach $12.08 billion by 2032, growing at a CAGR of 26.7%.
Furthermore, technological advancements are transforming film production and distribution. Augmented reality (AR) and virtual reality (VR) content are gaining attention, and technologies like machine learning and natural language processing are enhancing content and delivering personalized recommendations to captivate audiences.
Considering these conducive trends, let’s take a look at the fundamentals of the two watchlist additions from the Entertainment – Media Producers industry, starting with the second one from the investment point of view.
Stock #2: CuriosityStream Inc. (CURI)
CURI operates as a factual content streaming service and media company. The company provides premium video programming services in various categories of factual entertainment directly on SVoD platforms and indirectly through distribution partners, using various channels like bundled licenses, brand sponsorship, advertising, talks, courses, and partner bulk sales.
On August 15, 2023, CURI announced Space Week: Journey Beyond, a week of space documentaries and series launching on August 31, 2023. The event features the world premiere of "Search for Earth’s Lost Moon," exploring asteroids, space missions, breakthroughs, and the democratization of space.
In terms of the trailing-12-month levered FCF margin, CURI’s 13.14% is 72.1% higher than the 7.64% industry average. However, its 0.01% trailing-12-month Capex/Sales is 99.8% lower than the industry average of 4.09%. Furthermore, the stock’s 28.36% trailing-12-month gross profit margin is 42% lower than the industry average of 48.90%.
For the third quarter that ended September 30, 2023, CURI’s revenues came in at $15.63 million. The company’s net loss and net loss per share widened 490.1% and 455.6% over the prior-year quarter to come in at $26.57 million and $0.50, respectively. However, as of September 30, 2023, CURI’s total liabilities and equity stood at $106.31 million compared to $154.11 million as of December 31, 2022.
Analysts expect CURI’s revenue for the quarter ending December 31, 2024, to increase 7.1% year-over-year to $15.52 million, while its EPS for the same quarter is expected to be negative. Over the past month, the stock has gained 8% to close the last trading session at $0.64.
CURI’s bleak fundamentals are reflected in its POWR Ratings. It has an overall rating of C, equating to a Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a C grade for Growth, Value, Stability, Sentiment, and Quality. Within the Entertainment – Media Producers industry, it is ranked #8 out of 13. In total, we rate CURI on eight different levels. Beyond what we stated above, we also have given CURI grades for Momentum. Get all CURI ratings here.
Stock #1: Sony Group Corporation (SONY)
Headquartered in Tokyo, Japan, SONY designs, develops, produces, and sells electronic equipment, instruments, and devices for the consumer, professional, and industrial markets worldwide. The company distributes and produces software, digital networks, gaming consoles, music, animation, movies, miniseries, and other television programs.
In terms of the trailing-12-month EBIT margin, SONY’s 7.73% is 2.8% higher than the 7.52% industry average. Likewise, its 5.54% trailing-12-month Capex/Sales is 74.8% higher than the industry average of 3.17%. On the other hand, its 24.27% trailing-12-month gross profit margin is 31.9% lower than the industry average of 35.65%.
SONY’s sales for the second quarter ended on September 30, 2023, increased 7.73% year-over-year to ¥2.83 trillion ($18.93 billion). However, its operating income declined 28.8% year-over-year to ¥263 billion ($1.76 billion). The company’s net income attributable to SONY declined 29% year-over-year to ¥200.10 billion ($1.34 billion). Also, net income per share decreased 28.6% year-over-year to ¥161.74 per share.
For the quarter ending March 31, 2024, SONY’s EPS is expected to increase 24.2% year-over-year to $0.95. Its revenue for the quarter ending December 31, 2023, is expected to decline 10.3% year-over-year to $23.77 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 13.6% year-to-date to close the last trading session at $86.64.
SONY’s POWR Ratings reflect an uncertain outlook. It has an overall rating of C, equating to a Neutral in our proprietary rating system.
It has a C grade for Value, Momentum, Stability, Sentiment, and Quality. It is ranked #5 in the Entertainment – Media Producers industry. Click here to see SONY’s rating for Growth.
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SONY shares were trading at $86.81 per share on Monday morning, up $0.17 (+0.20%). Year-to-date, SONY has gained 14.08%, versus a 20.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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