The 6 Best Entertainment Stocks To Invest in for [Year]

by posted in FOREX TRADING, Investments, MAKE MONEY, TRENDING

The entertainment sector outlook has improved considerably since the bleak days of the COVID-19 pandemic. But the storm left its mark on the industry, forever changing the sector’s outlook and investment strategies for entertainment stocks.

These industry changes are two-sided. On the one hand, a report from UTA points out that entertainment consumption has increased since the dreadful days of the pandemic. On the other hand, audiences’ engagement with entertainment is also seeing a significant shift. 

Consumers are signing up for more subscriptions and combining services rather than picking winners and losers, forcing investors to adapt to new consumer trends. Staying on top of these trends can be challenging. But, as the true money and entertainment geeks we are, we’ve done the research for you and compiled a list of entertainment stocks that could entertain your portfolio.

We know a thing or two about entertainment trends here at Wealth of Geeks, so bringing you our top picks for entertainment stocks was a no-brainer. We’ve looked heavily into each of the companies we recommend in this list, evaluating the current stock price and the overall company outlook, growth potential, and risk. 

If the stocks we love aren’t your cup of tea or ones you already invest in, we have some helpful insight on why this sector is one to watch. 

Why Invest in Entertainment Stocks?

There’s more to entertainment stocks than just adding a fun company to your portfolio. The sector comprises some of the best-performing stocks of the last two decades and could continue to deliver wins for investors for years.

Analysts believe that the industry could grow at a healthy pace for the next decade. With some forecasting a Compound Annual Growth Rate (CAGR) of 11.44% through 2027. Just slightly above the 9% average return from the S&P over the past 25 years.

Industry leaders like Netflix (NASDAQ: NFLX) and Spotify Technology SA (NYSE: SPOT) have led the way in the past. The two entertainment giants disrupted their respective industries while delivering out-of-this-world gains for investors.

According to a Deloitte report, innovation and disruptive companies could continue to drive the sector, with video games forming a core part of the industry’s growth strategy. But, in entertainment, innovation is not exclusive to disruptive tech giants. The trend is also apparent in more traditional forms of entertainment. 

Take Avatar, for example. Known for its avant-garde films, the franchise utilizes cutting-edge methods and innovation to draw audiences to movie theaters. Its latest film, Way of Water, has grossed more than $2.3 billion dollars since its release.

Broader market data also supports a growth trend in the industry. This is pointed out in a 2022 report from PwC—one of the Big Four accounting firms. The report highlights that global entertainment and media (E&M) revenue rose slightly over 5%. That’s a whopping $2.32 trillion in total revenue—all good reasons to believe owning entertainment stocks could yield healthy profits soon.

Ways To Invest in the Entertainment Industry

One of the most convenient and accessible ways to invest in the entertainment industry is by owning entertainment stocks. In other words, stocks of companies that generate a significant portion of their revenues from the entertainment industry.  

They are typically involved in producing films, TV shows, entertainment experiences, and video games. But they might also offer fun services like streaming, concerts, attractions, and more. Here are some of those companies we think are worth consideration.

Disney (NYSE: DIS)

Disney is a timeless brand and innovation leader that has inspired many and touches on several industries, from theme parks to streaming services and travel. The company is celebrating 100 years of entertainment magic this year, which could help its theme park business boost attendance and climb back to pre-COVID-19 levels.

Their film catalog also offers a promising future outlook. Aside from Disney’s original classics like Mickey Mouse and Snow White, they’ve taken ownership of franchises like Star Wars, Marvel, and Pixar, which they now leverage as part of their streaming service, Disney+.

Its current price connects with the bottom of a trend that dates back to its 2009 and 2011 price bottoms. The market reacted positively to this trend after Disney shares jumped 20% this past November—a good indicator that the current price area could offer a low-risk entry point.

The Netflix streaming competitor is now over 100 million active subscribers strong, surpassing the company’s expectation of 60-90 million subscribers by 2024. This could be an excellent time to pick up Disney stock for those looking to add some “sparkle” to their portfolio. 

Netflix (NASDAQ: NFLX)

Gone are the days of rewinding your own tape to avoid extra fees when returning your movie rental. Netflix, the streaming and entertainment giant, changed that. It also disrupted distribution models across film and television, forever changing the entertainment business.

Capital markets tend to reward disruption generously. Since its IPO, Netflix investors have seen company shares soar more than 39,000%—a jaw-dropping and well-compensated return for disrupting an industry worth nearly $100 billion in the U.S. alone.

But in 2022, it appeared that investors decided to call it a wrap for Netflix. Shares of the company tumbled to lows not seen for a long time. In as little as six months, the entertainment giant lost over 75% of its market value—ouch.

Yet, despite its recent troubled share-price performance, the markets seem not ready to let go of the “N” in FAANG. Netflix has since made an impressive recovery, making it one of the best mega-cap performers this year. 

Shares of the company climbed back up slowly but surely, delivering nearly 200% in gains for investors savvy enough to buy close to the bottom. Part of its recovery is largely due to the company surprising investors with better-than-expected financial returns. Third-quarter 2023 earnings came in at $3.73 per share, an increase of more than 20% year-over-year (YoY).

It seems more people are returning to Netflix now after a drop in subscriptions during previous years. With close to 45% of growth left to reach all-time highs and clear skies ahead, Netflix could be worth an investment.

Spotify Technology (NYSE: SPOT)

Spotify shook the very foundation of the music industry much the same way that Netflix did with television and film. The Swedish music streaming giant emerged nearly 17 years ago as a contendant to traditional music distributors, forever changing the music business. 

Now, the company boasts more than 220 million paid subscribers and over half a billion users. In perspective, that’s more than 6% of the global population and more than 10% of the total population with internet access. This makes SPOT one of the world’s most extensive global music streaming services. 

While there is still considerable global market share to capture, Spotify is ramping up its growth efforts by adding additional services like podcasts and audiobooks.

December is a month to look forward to for Spotify investors. The company launched podcast ad services in five new countries and added over 150,000 audiobooks to its extensive library.  

Fundamentally, the company has plenty to brag about. Shareholders have enjoyed a strong year with profits of nearly $13 billion, more than doubling its income since 2018. SPOT shares have been climbing slowly over the past few months, following a pattern similar to that of Netflix—up more than 175% since their 2022 lows. 

Despite the excellent short-term performance, shares of the music industry giant are still well below their $388 all-time highs. They are potentially giving shareholders plenty of room for growth above their heads. Perhaps investors might not be too late to buy the dip on this one—time will tell.

MGM Resorts International (NYSE: MGM)

MGM is a hospitality, global gaming, and entertainment giant. The holding company owns and operates integrated casinos, hotels, and entertainment resorts across the United States and Macau.

While the company focuses on hospitality, the cash engine comes from casinos. MGM enjoys the positive cash flow on their business and has been using it to shareholders’ benefit by buying back stock regularly.

Its share price has been climbing steadily since its 2008 bottom. It is maintaining the bottom of its technical price channel except for a dramatic drop during the 2020 COVID-19 crash. Since then, MGM shares have increased nearly 10x and appear to show no signs of slowing down.

Overall, Las Vegas has seen an increase in visits in 2023, which could benefit MGM’s revenue and fourth-quarter earnings results. Formula 1 has bet big on the strip this year, bringing big money to America’s number-one entertainment hub. Another reason to believe Q4 could bring an unexpected positive surprise.

Everi Holdings Inc (NYSE: EVRI)

Another way to bet on the entertainment and casino industry is by owning shares of companies like Everi Holdings. Formerly Global Cash Access Holdings, Everi produces and rents slot machines and financial equipment for casinos.

Naturally, EVRI is located in no other than Nevada, potentially making it an excellent investment for those looking to capitalize on the broader success of the strip. Everi has surprised investors over the past few quarters, beating expectations in three of its four latest reports. 

But investors have been slow to catch up on their performance. Shares of the company have been on a decline since their 2021 peak. A valuation largely driven by a bull market and increased euphoria surrounding online sports betting brands.

Technically, shares are quickly approaching a critical level near the $9 mark. This area served as a price ceiling, providing strong resistance for the stock from 2007 until 2019. Resistance levels tend to become support levels, and vice versa. Therefore, it may be possible that the area will become a low-risk entry point for investors who have been waiting patiently on the sidelines.

EVRI has a compelling forward Price-to-Earnings (P/E) ratio of 10 multiples and a solid track record of reporting. These are all good reasons for investors to consider betting on this gambling stock.

Electronic Arts Inc (NASDAQ: EA)

Founded nearly forty years ago, Electronic Arts (EA) has cemented its place as a leader in home entertainment. EA is a household name in the gaming industry and one of the world’s most influential video game companies. 

The leader in sports games is home to franchises like the NFL, FIFA, the Sims, and Disney games, including Star Wars. Brands across the sector might need to look for ways to capitalize on the gaming industry to stay relevant—as highlighted by a recent report by Deloitte.

EA’s partnership with Disney demonstrates its potential to work with other leaders in the sector. This could be indicative that the brand may be well-positioned to benefit from this trend. Overall, the company’s finances also appear healthy. Electronic Arts recently reported record net bookings with a 21% year-over-year increase. Their net income of $399 million grew 33% Year-over-year, reporting a net profit margin of 21%.

Shares of the company have primarily traded sideways for the past few months. However, the price action appears to be consolidating in a triangle pattern going back to 2018. With price action getting tighter, the need for investors to make up their minds about a new and definite direction appears to be on the horizon.

If the share price generates enough pressure and their financials stay healthy, we could see a significant multi-month breakout to the upside. Electronic Arts is one to watch closely in the coming months.

What Makes a Good Entertainment Company Investment?

Adding entertainment stocks to your portfolio can be lucrative and fun, but what makes an entertainment stock a worthwhile investment?

Because the industry has so many different segments, it can be difficult to generalize. Nevertheless, you can use a few industry-wide indicators to determine whether an entertainment stock deserves more than a passing glance.

Brand value is one of the leading indicators of growth potential for any entertainment company. Companies with robust and popular content libraries, artists, distribution channels, and audiences have higher chances of remaining relevant and profitable.

Take Disney, for example; it is a timeless brand with a strong library of content that speaks for itself. The brand capitalizes on various forms of content and entertainment distributed across various channels. This includes everything from merchandise to films and even theme parks.

But Disney doesn’t solely rely on its existing brand to remain relevant. The company is constantly innovating—the second trait of successful entertainment brands. Entertaining and maintaining your audience’s attention can be tricky. That is why successful entertainment franchises constantly evolve by creating original content and finding new ways to engage their audience.

Last but not least is the company’s financial health. An in-depth look at the books or their future earning potential can help paint a picture and determine whether the investment is worth taking.

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