Whos up, whos down and who is really in deep trouble on Wall Street?
Media stocks have been on a wild ride in the first half of 2023. On the latest episode of Variety podcast Strictly Business, Variety Intelligence Platform media analyst Heidi Chung breaks down how Disney, Netflix, Comcast and other leading lights of media and entertainment have performed so far this year.
Variety Intelligence Platform media analyst Heidi Chung Variety via Getty Images The best performing sector in the first half of the year was technology. And a lot of that was driven by the interest by investors in the generative AI boom, specifically, Chung says in conversation with Strictly Business hosts Andrew Wallenstein and Cynthia Littleton.
This sort of optimism about where technology is headed has really driven up those stocks. Though I will say even though theres a lot of bullishness in the market, a lot of investors right now are worried that were seeing a bit of an overbought situation. So does this market have that much more room to run? That remains to be seen, but like I said, technology was one of the best performers. And within technology, it was really companies mentioning AI, like Nvidia, Microsoft and Google, she says.
The news out of most of the media giants has been grim in recent months: Layoffs, budget cuts and retrenchment in many cases. The expectation is that the second-quarter earnings reports that will roll out later this month will be weak. Chung, who pens VIP+s weekly Media and Money newsletter, says theres hope on the horizon that the advertising market will improve over the first half, particularly in the digital sector. Linear TV advertising is expected to stay flat at best.
If the second half of 2023 is better than a lot of people were expecting, I think we could definitely see advertising start to come back, Chung says. That being said, balance sheets are so important at these companies. Its about how much money theyre going to have to spend on other things aside from their day-to-day line items.
One of the sharpest stock declines over the past year has been Warner Bros. Discovery. On one hand, investors have faith in the ability of CEO David Zaslav and his new regime to improve the companys financial health. On the other, controversy at CNN and other internal dramas have dogged the company.
When we talk about Warner Bros. Discovery stock doing well this year, thats not really the whole picture. If you take a look at the stock five years ago, it was at $25 a share. So sitting at $13 is far, far lower than it should be on historical basis, Chung says. And so theres a lot of room to run here.
Strictly Business is Varietys weekly podcast featuring conversations with industry leaders about the business of media and entertainment. New episodes debut every Wednesday and can be downloaded on iTunes, Amazon Music, Spotify, Google Play and SoundCloud.