The entertainment industry has been affected by consumers’ spending cuts in the face of high inflation and recession concerns. However, the industry appears well-positioned to grow significantly in the long term.
While quality entertainment stock Endeavor Group Holdings, Inc. (EDR) could be worth buying, I think it could be wise to avoid fuboTV Inc. (FUBO), considering its weak fundamentals.
The global amusement park market is expected to reach $68.8 billion by 2028 at a CAGR of 4.9%. Rapid urbanization, expansion of the travel and tourism industry, innovative rides, lodging facilities, and official products are driving market expansion.
Also, technologically advanced solutions increased disposable incomes, and investments in themed amusement parks and 4D rides will likely propel the market.
Furthermore, the global smart entertainment systems market is expected to grow at 5.8% CAGR until 2033. Investors’ interest in entertainment stocks is evident from Invesco Dynamic Leisure and Entertainment ETF (PEJ) 7.3% returns over the past three months.
However, due to high inflation, many consumers in the United States are cutting back on their usual spending habits, including their typical entertainment expenses.
Let us look deeper into the fundamentals of the featured stocks.
Stock to Buy:
Endeavor Group Holdings, Inc. (EDR)
EDR is a global sports and entertainment company. It owns and operates premium sports properties, including the Ultimate Fighting Championship (UFC). It also produces and distributes sports and entertainment content. The company operates through three segments, Owned Sports Properties; Events, Experiences & Rights; and Representation.
EDR’s trailing-12-month EBIT margin of 10.63% is 26.2% higher than the industry average of 8.43%. Its trailing-12-month gross profit margin of 61.13% is 23.3% higher than the industry average of 49.59%.
EDR’s revenue increased 8.4% year-over-year for the first quarter that ended on March 31, 2023, to $1.59 billion. Also, its total current assets came in at $2.54 billion for the period that ended March 31, 2023, compared to $2.53 billion for the period that ended December 31, 2022. Its total assets came in at $12.62 billion, compared to $12.50 billion in the same period.
The consensus revenue estimate of $5.75 billion for the year ending December 2023 represents a 9.2% increase year-over-year. Its EPS is expected to grow 23.2% to $1.30 for the same period. EDR’s shares have gained 14% over the past year to close the last trading session at $22.54.
EDR’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
EDR also has a B for Growth and Momentum. It is ranked first among 14 stocks in the Entertainment - Sports & Theme Parks industry. Click here for the additional POWR Ratings for Value, Stability, Quality, and Sentiment for EDR.
Stock to Avoid:
fuboTV Inc. (FUBO)
FUBO operates a live TV streaming platform for live sports, news, and entertainment content in the United States and internationally.
FUBO’s trailing-12-month CAPEX/Sales of 0.04% is 99% lower than the industry average of 4.01%, while its trailing-12-month asset turnover ratio of 0.79x is 60.6% lower than the industry average of 0.49x.
FUBO’s total operating expenses for the first quarter ended March 31, 2023, increased 11.1% year-over-year to $405.83 million. Its net loss and loss per share came in at $83.62 million and $0.37.
However, its other long-term liabilities came in at $2.48 million for the period that ended March 31, 2023, compared to $1.57 million for the period that ended December 31, 2022.
FUBO’s EPS is expected to come in at $0.30 for the quarter ending September 2023. Over the past six months, the stock has lost 22.1% to close the last trading session at $2.12.
FUBO’s has an overall D rating, equating to a Sell in our POWR Ratings system.
It also has an F grade for Stability and a D grade for Sentiment and Quality. It is ranked #11 in the same industry. Beyond what is stated above, we’ve also rated FUBO for Value, Momentum, and Growth. Get all FUBO ratings here.
What To Do Next?
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EDR shares were trading at $22.47 per share on Thursday afternoon, down $0.07 (-0.31%). Year-to-date, EDR has declined -0.31%, versus a 15.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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