The entertainment industry is undergoing a transformation driven by social media, gaming, online gambling, and high-quality streaming. However, macroeconomic uncertainties have pressured the sector, leading to reduced consumer expenditure and overall revenue decline.
Against this backdrop, fuboTV Inc. (FUBO) is one such stock from the entertainment industry that I think is best avoided now. However, it could be wise to watch Live Nation Entertainment, Inc. (LYV).
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s happening in the entertainment industry.
Inflation and recession fears are causing consumers to reduce discretionary spending, potentially slowing entertainment demand and impacting industry growth. Despite this, the video game industry shows promise due to the global trend of online gaming, the rise of fast network connectivity like 5G, and the strong demand for 3D games.
The streaming market, catering to live sports, news, and entertainment, is set to grow in 2024, driven by rising consumer demand for flexible, on-the-go access to diverse, real-time content and a rising number of video-on-demand users. The global video streaming market is expected to reach $1.90 trillion by 2030, growing at a 19.3% CAGR.
Social media, gaming, and streaming redefine the entertainment sector with emerging business models. Esports has surged as a mainstream entertainment form, contributing to the global gaming market, which is estimated to reach $665.77 billion by 2030, growing at a 13.1% CAGR.
Furthermore, the market's prospects are bolstered by the increasing adoption of cutting-edge technologies. Virtual Reality (VR) has made its mark in the gaming industry, creating an entirely new gaming generation with immersive first-person perspective experiences.
Considering these trends, let’s examine the fundamentals of the two stocks from the Entertainment - Sports & Theme Parks industry, starting with the one ranked lower from the investment point of view.
Stock to Sell:
fuboTV Inc. (FUBO)
FUBO operates a live TV streaming platform for live sports, news, and entertainment content in the United States and internationally. Its fuboTV platform allows customers to access content through streaming devices, as well as on SmartTVs, computers, mobile phones, and tablets.
In terms of the trailing-12-month Capex/Sales, FUBO’s 0.04% is 99.1% lower than the 4.09% industry average. Likewise, its 3.83% trailing-12-month gross profit margin is 92.2% lower than the industry average of 49.13%.
For the fiscal third quarter (ended September 30, 2023), FUBO’s total revenue came in at $311.82 million. The company’s net loss from continuing operations narrowed 20.1% year-over-year to $84.49 million. Moreover, its adjusted EBITDA narrowed 25.9% from the prior-year quarter to $61.47 million.
For the quarter ending December 31, 2023, FUBO’s EPS is expected to remain negative. Over the past month, the stock has gained 4.7% to close the last trading session at $3.33.
FUBO’s bleak prospects are reflected in its POWR Ratings. It has an overall D rating, which translates to a Sell in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an F grade for Stability and a D for Sentiment and Quality. It is ranked #12 out of 13 stocks in the Entertainment - Sports & Theme Parks industry. To access FUBO’s grades for Growth, Value, and Momentum, click here.
Stock to Hold:
Live Nation Entertainment, Inc. (LYV)
LYV operates as a live entertainment company. It operates through Concerts; Ticketing; and Sponsorship & Advertising segments.
In terms of the trailing-12-month Return on Common Equity, LYV’s 474.88% is considerably higher than the 3.28% industry average. Likewise, its 1.21x trailing-12-month asset turnover ratio is 135.7% higher than the industry average of 0.52x. However, its 7.51% trailing-12-month EBITDA margin is 60.2% lower than the industry average of 18.88%.
LYV’s revenue for the third quarter ended September 30, 2023, increased 32.5% year-over-year to $8.15 billion. The company’s adjusted operating income rose 34.7% year-over-year to $836.10 million. In addition, its net income attributable to common stockholders of LYV and net income per common share came in at $483.50 million and $1.78, up 33.8% and 28.1% year-over-year, respectively.
Street expects LYV’s revenue for the quarter ending December 31, 2023, to increase 11.1% year-over-year to $4.77 billion, while its EPS for the same quarter is expected to remain negative. It surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past nine months, the stock has gained 40.6% to close the last trading session at $93.27.
LYV’s POWR Ratings reflect an uncertain outlook. It has an overall rating of C, which translates to Neutral in our proprietary rating system.
It has a C grade for Growth, Value, Momentum, Sentiment, and Quality. Within the same industry, it is ranked #2. To see LYV’s Stability rating, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
LYV shares were trading at $94.02 per share on Tuesday morning, up $0.75 (+0.80%). Year-to-date, LYV has gained 34.82%, versus a 25.35% 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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