Many Hollywood stocks miss the broader market in the first half of the year.

The difficult first half of the year for American media rallies ended relentlessly.

Selling stocks and downgrading analyst ratings is a regular feature of the year for the media and entertainment giants. And the sudden drop in Netflix subscribers in the first quarter only raised questions about whether it would pay for a broader Hollywood streaming cycle over time.

And in the short term, amid an ongoing structural industry transition everywhere, streaming on TV platforms, fears of an inflation-driven recession have raised concerns about a boom in ad revenue and speculation about how many online video subscribers will pay. at once . . Time.

So it’s no surprise that most Hollywood stocks are falling mid-year, with many noting a bigger drop than the 20% drop in the broader S&P 500 stock index. Rarely profitable in the media space is the sports entertainment station WWE, which grew 25.5% day by day.

Analysts cited the potential financial boom and future negotiations over US content rights as possible outcomes for the rally. And even recent news that the company was investigating Chairman and CEO Vince McMahon, who stepped aside to make way for his daughter Stephanie McMahon to become the new CEO, and another CEO for “alleged misconduct” didn’t stop the action midway through. the road. In 2022, Morgan Stanley analyst Benjamin Swinburne raised the WWE price from $60 to $75 so far, “to make it more relevant where we see fair value”. However, it maintained its “equal weight” rating, “because consensus estimates appear to reflect a reasonable baseline assumption for the company to re-title over the past 24 years in the US” and increased its “bull case value” by $100. .

Meanwhile, Fox Corp., Paramount Global, AMC Networks, satellite radio giant SiriusXM and movie players Cinemark and Imax are among the industry stocks that will hold the market through mid-2022. Street consider. Sports betting is upside down, down 11% (Class A) or 12% (Class B). And shares of AMC Networks You better call Saul The network, which has a growing niche streaming business, is down 15.4%.

Meanwhile, Paramount Global, whose streaming earnings surprised some, has lost 16.5% of its share value this year. Imax shares, which appear to have been insulated from the rebuilding of Hollywood’s box office without expensive real estate, are down just 6.7%, while Cinemark shares are down 8% in the first half, while SiriusXM shares are down. Stocks were 4 percent ahead of the market at the half-year mark.

The sharp drop in Netflix stock, which has plunged 70% in value this year after being a lucrative stock booster in the media sector in recent years, is a wake-up call for the streaming space. After disappointing with key first-quarter results, the video streaming giant’s shares hit Wall Street analysts, slashed price targets and lowered Netflix to pre-order ratings.

Benchmark analyst Matthew Harrigan, for example, stopped “selling” Netflix on June 14, explaining: Price/earnings consensus estimate for 2023. (15.4x per benchmark). He also noted that “the issue is growth mitigation”, for example, pointing to free cash flow trends.

A few days earlier, Eric Sheridan of Goldman Sachs downgraded Netflix to a “bulk sale” rating, lowering its revenue forecast for 2022 and 2023 and lowering its price target from $265 to $186. Sheridan cited “concerns about the impact of the consumer recession, as well as increased competition on demand trends, margin expansion and content spending levels.

Netflix, for Goldman Sachs analysts, is suddenly a “show me a story.” Wells Fargo analyst Stephen Kohl also described Netflix in mid-June as a declining force, as he summarized:

Hollywood conglomerates have outperformed Netflix, but Walt Disney shares are still down 38% in 2022 on fears that fewer people would visit a local theme park or multiplex, reducing consumer discretionary spending. Warner Bros. shares. Discovery shares fell 44 percent to $24.08 after its post-merger market debut in early April, while Sony’s US shares tumbled 34 percent.

“Disney is a real bull/bear debate,” Wells Fargo’s Cahall wrote in his June 17 report. “While it may not be, we’ve spoken to many Disney henchmen who think [theme] Parks are doing better than the recession scare, and content will help Disney+ get stronger [the] Calendar [year] second half Bears signal sub-earnings trading between now and broadcast, recession risk and CEO view.

Kehl, in turn, summarized the views of investors from United Warner Bros. on Discovery: “Everyone agrees that Warner Bros. Discovery is very cheap and most would agree that they said it used to cost $5 to $10 a share. In the long term, ups and downs are suggested, but the short term is overshadowed by overhaul valuation concerns and growing pains from natural mergers. Nobody wants to be an investor the day before and the time for such an event has not yet been determined.

Smaller, more concentrated entertainment companies have also failed to overcome negative market trends this year. Lionsgate shares are down 43%: the spin-off, planned by this studio for Starz this summer, should test the value of streaming platforms these days. And Endeavor has lost 40% of its value over the past six months, though its sports, media and entertainment businesses, which include WME and the mixed martial arts organization UFC, have bounced back after a pandemic.

The pay-TV giants face their own challenges year after year, with Comcast shares down 22% and Charter Communications shares down 30%. The main factor here was the concern with the slowdown in the growth rate of broadband subscribers. “Many investors think the cable sale is almost done, but then a new negative comes in,” Kehal said. “Audience ratings are almost on par with TV, and that doesn’t feel right to many given the structural advantages of broadband markets.”

And despite recent blockbusters like Top Gun: MaverickThe biggest theater stock will lag behind the closing share price at the end of 2021. Memestock-based AMC Theaters lost 51% in the first half of the year, while London-based real estate shareholder Cineworld dropped 33%. .

Macquarie analyst Tim Knollen urged investors to avoid when it comes to entertainment. “We are ‘neutral’ in the media, and Disney and Warner Bros. Discovery are our only ‘best,'” he wrote in a recent report. About the latter, he told Warner Bros. Of Discovery, he said, “The newly merged company has the potential to build global power directly into streaming customers.”