Despite prevailing macroeconomic challenges, the entertainment industry exhibits resilience, capitalizing on increased consumer engagement and the integration of cutting-edge technologies. In this context, it could be wise to keep a watch over two fundamentally sound stocks, Sony Group Corporation (SONY) and World Wrestling Entertainment, Inc. (WWE).
Before delving deeper into the fundamentals of these stocks, let us take a look at how the entertainment industry has been faring so far.
The pandemic brought about a profound transformation in the entertainment industry's landscape. Lockdown measures necessitated the closure of cinemas and theaters, driving a surge in demand for streaming services. While traditional entertainment formats suffered, entertainment and media companies saw a rise in subscribers.
Moreover, the industry has experienced substantial advantages through the utilization of digital tools and platforms, streamlining content production, distribution, and consumption, thereby catalyzing a transformative surge in market expansion.
Additionally, online streaming has experienced a rapid rise in recent years. The global video streaming market was valued at $455.45 billion in 2022. The market is projected to grow to $1.90 trillion by 2030, growing at a 19.3% CAGR.
While the global entertainment and media industry is currently facing challenges due to sluggish consumer spending resulting in a deceleration of revenue growth rate, the industry is well-positioned to thrive as it aims to embrace emerging technologies, with a particular emphasis on harnessing generative AI to enhance creative processes and boost productivity.
For instance, in the realm of media and entertainment, Generative AI has undergone swift and pioneering expansion in recent times, reshaping the dynamics of content generation, personalization, and consumption. Generative AI in the media and entertainment market is expected to reach $12.08 billion by 2032, growing at an impressive CAGR of 26.7%.
Considering the industry trends and projections, it could be worth monitoring entertainment stocks SONY and WWE. To that end, let us now examine the fundamentals of these stocks in detail:
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 engages in the distribution and production of software, digital networks, gaming consoles, music, animation, television movies, miniseries, and other television programs.
SONY’s trailing-12-month net income margin of 7.28% is 73.9% higher than the 4.19% industry average. Its trailing-12-month levered FCF margin of 6.37% is 32.4% higher than the industry average of 4.41%. In addition, the stock’s trailing-12-month cash per share of $4.02 is 74.7% higher than the industry average of $2.30.
For the first quarter of fiscal 2024, which ended on June 30, 2023, SONY’s revenue increased 32.9% year-over-year to ¥2.96 trillion ($20.34 billion), while its operating income amounted to ¥253.04 billion ($1.74 billion).
During the same period, the company’s attributable net income stood at ¥217.55 billion ($1.49 billion) and ¥175.67 per share, respectively. Also, its adjusted EBITDA came in at ¥406.20 billion ($2.79 billion).
Street expects SONY’s revenue for the second quarter (ending September 30, 2023) to increase 7% year-over-year to $19.88 billion, while its EPS for the current quarter is expected to be $1.13 and is projected to improve by 5.9% per annum over the next five years. Moreover, the company topped its revenue estimates in three of the trailing four quarters, which is promising.
SONY’s revenue and net income have grown at CAGRs of 13.9% and 12.7% over the past three, respectively. Over the same period, its EPS and total assets rose at CAGRs of 13.2% and 11.6%, respectively.
The stock has gained 9.5% year-to-date to close the last trading session at $83.53.
SONY’s POWR Ratings reflect this promising outlook. It has a B grade for Sentiment. In the 13-stock Entertainment - Media Producers industry, it is ranked #3. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Click here to see SONY’s ratings for Growth, Value, Momentum, Stability, and Quality.
World Wrestling Entertainment, Inc. (WWE)
WWE is an integrated media and entertainment company that engages in the sports entertainment business in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. It operates through three segments: Media; Live Events; and Consumer Products.
On August 2, WWE revealed that its WrestleMania event, held this year in April, contributed a substantial economic impact of $215 million to the Los Angeles area. The findings, as reported by Applied Analysis, signify a notable achievement, surpassing the previous year's record of $206.50 million in economic influence in the Dallas/Arlington region.
Additionally, this pop-culture spectacle achieved a historic milestone for WWE by attracting a crowd capacity of 161,892 fans, becoming the company's most-attended and highest-grossing gathering to date.
On July 7, WWE declared a quarterly dividend of $0.12 per share for all Class A and B shares of common stock, payable to its shareholders on September 25, 2023. The company’s annual dividend of $0.48 translates to a 0.43% yield on the prevailing prices, while its four-year average dividend yield is 0.84%.
The stock’s trailing-12-month net income margin of 12.64% is 250.8% higher than the 3.60% industry average. Its trailing-12-month ROCE of 25.05% is 666.2% higher than the industry average of 3.29%. In addition, WWE’s trailing-12-month ROTA of 11.22% compares to the industry average of 1.54%.
In the fiscal second quarter, which ended on June 30, 2023, WWE’s total net revenues increased 25% year-over-year to $410.30 million, while its operating income rose 25.9% from the year-ago value to $87.70 million.
The company’s adjusted net income and adjusted EPS amounted to $71 million and $0.91, up 41.2% and 54.2% from the prior-year quarter, respectively. Also, its adjusted OIBDA grew 53.8% year-over-year to $140.70 million.
The consensus revenue estimate of $351.81 million for the fiscal fourth quarter (ending December 31, 2023) represents an 8.2% increase year-over-year. The consensus EPS estimate of $0.68 for the same quarter indicates a 31.4% improvement year-over-year. The company has an impressive surprise history, surpassing the consensus revenue and EPS estimates in three of the trailing four quarters.
Additionally, its revenue and EBIT have grown at CAGRs of 9.3% and 10.2% over the past three years, respectively. Likewise, its net income and EPS have improved at CAGRs of 5.3% and 7.9% over the same period, respectively.
WWE’s shares have gained 56.4% over the past year and 64.8% year-to-date to close the last trading session at $112.90.
WWE’s sound fundamentals are reflected in its POWR Ratings. It has a B grade for Quality. Within the same industry, it is ranked #9. Click here to see WWE’s ratings for Growth, Value, Momentum, Stability, and Sentiment.
What To Do Next?
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SONY shares were trading at $82.50 per share on Wednesday afternoon, down $1.03 (-1.23%). Year-to-date, SONY has gained 8.41%, versus a 16.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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