Box Office Renaissance, Entertainment Stocks Suffer

Kids are back in the classroom and more folks are back working at the office. Even corporate travel seems in full swing as autumn commences. A full “return to normal” leaves less in the way of free time for busy families across the country, but it’s important to take time to unplug. How about a trip to the movie theater? Or, if you are like so many consumers who bought a big screen TV during the pandemic, that will do just fine too. 

Key Takeaways:  

• Netflix now dominates the motion picture industry, but shares have been under pressure all year long amid a selloff in tech-related entertainment stocks 
• A look at year-to-date sector performances with Communication Services ranked last 
• Corporate event data shows several key conferences and forums ahead of earnings season that could move individual stocks and the broader industry 

 Better Box Office Numbers in 2022, Still Lag Pre-Pandemic Totals 

Source: IMDbPro 

Corporate event data from Wall Street Horizon tracks which companies are leading the motion picture race. For the rest of the year, after a strong summer box office season, it finds the king of the hill is Netflix (NFLX). 

Netflix Leads the Movie Release Count for the Remainder of the Year 

Source: Wall Street Horizon 

Data reveals that the California-based $97 billion market cap company continues to dominate the pop culture scene. The streaming giant has a track record of scoring an increasing number of Academy Award nominations in recent years. The movie landscape continues to turn more toward at-home versus in-theater, but the Communication Services stock is down a whopping 63% so far in 2022. 

 Netflix Shares Decline More than 60% in 2022 Despite Prominence in the Movie Market 

Source: Stockcharts.com 

Zooming out, the Communication Services sector has been the worst-performing area of the market year-to-date. Big drops in Meta Platforms (META), Alphabet (GOOGL), Walt Disney (DIS), Charter Communications (CHTR), and so many others, have weighed on the growth-heavy part of the Tech-Media-Telecom (TMT) niche of the U.S. equity market. The sector’s SPDR ETF (XLC) is down by nearly one-third in 2022. 

Year-to-Date Sector Performances: Communication Services Leads Market Lower 

Source: Stockcharts.com 

 The Sector Perspective  

 Looking ahead, corporate event data shows several key conferences and forums through year-end that could move individual stocks and the broader industry. Investors will want to grab a bowl of popcorn and take in what new information will be presented at a pair of conferences. 

Two Industry Conferences Ahead of Earnings Season 

 First up is the UiPath FORWARD 5 gathering in Las Vegas later this month. The digital transformation event from September 27-29 features many TMT company management teams providing updates and insights as to the future of technology and robot innovation. 

Then comes the Edge Computing Expo occurring from October 5-6 in California. Big data, the Internet of Things, and digital transformation are some of the key topics at this tech conference. Communication Services stalwarts like Netflix, Amazon (AMZN), and AT&T (T) are expected to present. 

Following conference season comes the all-important Q3 earnings period that kicks off in mid-October. The leading horse in the race for the most movies in the remainder of the year is also the first to issue results. 

Will the Bears Finally Chill? 

Netflix has had some stunning share price reactions to earnings this year—the stock plunged 22% after reporting better than expected EPS numbers back in January and shares cratered again after the April report. While early, the options market has priced in a more than 10% earnings-related stock price swing around its unconfirmed October 18 third-quarter reporting date. 

On the positive, be sure to look out for possible share buyback increase announcements amid a market with much lower equity valuations today versus a year ago and ahead of a new buyback tax that commences January 1, 2023. 

Expect fireworks this reporting season across the sector as volatility continues to run high. After Netflix’s numbers, AT&T, Comcast (CMCSA), Amazon, Warner Bros. Discovery (WBD), and Roku (ROKU) have earnings dates in late October. 

The Bottom Line 

Will Q4 bring cheers or jeers for the big movie companies? You, the investors, will be the critics. It is important to arm yourself with accurate forward-looking corporate event data so you stay ahead of the volatility. Like in so many sectors, the pandemic reshaped consumer behaviors, and some new entrants now dominate the entertainment industry. Staying on top of the latest trends is pivotal to managing risk. 

This article was originally published on the Wall Street Horizon website. 

This blog post has been written by a third-party contributor and does not necessarily reflect the opinion of FactSet. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.