Entertainment stocks stagnate as analysts turn bearish on real-time video valuations

This year, investors had rallied shares in legacy television content companies as those companies switched their businesses to direct-to-consumer video streaming services. But those entertainment stocks have fallen dramatically in recent days as Wall Street analysts have turned bearish.


On Friday, Wells Fargo analyst Steven Cahall downgraded three entertainment stocks: AMC Networks (AMCX), Discovery (DISCA) and ViacomCBS (VIAC). It lowered its ratings on AMC and ViacomCBS to underweight from the same weight. Cahall passed the same weight as the overweight on Discovery. It lowered its price targets on all three.

Valuations were widened for all three due to investor enthusiasm for their streaming strategies, Cahall said in a note to clients.

“We believe that primarily non-core investment drove massive increases recently at AMCX, DISCA and VIAC,” Cahall said. “Businesses are doing better than 2020 due to the DTC (direct to consumer), but there is too much risk to justify recent assessments.”

Entertainment stocks plummet

In today’s stock market, AMC shares plunged 11.3% to 54.01. On March 15, it reached a 5-year-plus high of 83.63.

Meanwhile, Discovery fell 27.5% to 41.90 and ViacomCBS fell 27.3% to 48.23. The discovery reached an all-time high of 78.14 on March 19. ViacomCBS hit a record high of 101.97 on March 15.

Elsewhere in the entertainment stocks, Internet TV leader Netflix (NFLX) was up 1% to 508.05. Netflix shares hit their all-time high of 593.29 on January 20.

On Thursday, research firm MoffettNathanson downgraded ViacomCBS to sell from neutral. He lowered his target price for VIAC shares to 55 from 67.

Discovery, ViacomCBS called ‘overrated’

Among other entertainment actions, MoffettNathanson reiterated its purchase ratings on Discovery and Fox (FOXA). It has neutral ratings on AMC, Netflix and Walt disney (DIS).

On Tuesday, investment bank UBS downgraded Discovery to sell from valuation neutral. Maintained a sell rating on ViacomCBS.

Last week, Macquarie Research called Discovery and ViacomCBS “overvalued” and downgraded both stocks to an underperformance from neutral.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software, and semiconductor stocks.


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