Investors across the world have been spooked by the coronavirus, and the market is feeling the effects. In response to the growing number of infections outside of China, stocks notched their worst weekly performance since the financial crisis in 2008.
That being said, in times of crisis, people turn to entertainment as an escape. And entertainment companies can ride that demand all the way to profits. Wall Street has long been sanguine about the money to be made in media, movies, and music.
So, it’s clear that entertainment sells. And some of Wall Street’s top analysts are recommending billion-dollar names from among the entertainment media. We’ve used TipRanks’ Stock Comparison tool to look at three recent calls in the industry, and to find out what makes two of them compelling buys – while the third is warding off the analyst community. Here are the results.
Lions Gate Entertainment Corporation (LGF.A)
Movies have been popular since their introduction a century ago. The high production overhead that characterizes the industry, combined with the profit potential of a blockbuster, practically writes an invitation for investors to buy shares. Lions Gate is a major production company in the motion picture, television, animation, and digital arenas, and brought in over $3.6 billion in revenue in 2019.
The stock is down in recent months, and the company missed earnings estimates in its fiscal Q3 report. The company reported 14 cents EPS on an adjusted basis, against a forecast of 18 cents. Revenues, however, were up; at $998.5 million, the top line beat the forecast by 7.8% and grew 6.9% year-over-year.
Despite the stock’s poor performance recently, some Wall Street analysts see its current situation as a buying opportunity. Barrington’s 4-star analyst James Goss writes, “A robust content pipeline for Starz provides encouragement for achieving the company's long-term goals for the platform. We remain encouraged by the overall trajectory of the service…”
Goss puts a Buy rating on LGF.A, in line with his view that the lower share price is an attractive point of entry. Supporting his upbeat outlook for the company’s prospects, he raised his price target from $12 to $14. His new target suggests room for 76% share appreciation in the coming 12 months. (To watch Goss’ track record, click here)
Lions Gate has a Strong Buy analyst consensus based on 3 Buys and 1 Hold given in recent weeks. The average price target is slightly more aggressive than Goss’, at $14.25, and implies an upside potential of 80% from the stock’s $7.93 share price. (See Lions Gate stock-price forecast on TipRanks)
iHeartMedia, Inc. (IHRT)
While so much today revolves around digital media, radio is still alive and well. iHeartMedia is the largest radio station owner in the US, with over 850 AM and FM stations. The company is also involved in media advertising and digital entertainment distribution.
IHRT reported flat revenue in its last quarterly, showing $1.03 billion. Year-over-year, Q4 adjusted EBITDA was also down. However, looking ahead, modernization efficiencies, continued digital growth driven by podcasting, and contribution of high-margin political revenue from presidential election year are expected to drive an improvement in EBITDA and margins.
Guggenheim analyst Currey Baker, rated 5-stars by TipRanks, is impressed with iHeartMedia’s combination of low share cost and strong prospects, and thus, initiated his coverage with a Buy rating. His price target, $21.50, indicates confidence in 42% upside growth this coming year. (To watch Baker’s track record, click here)
Supporting his optimism, Baker says in a recent research note, “iHeart's portfolio of radio and digital audio assets reaches consumers at industry-leading scale and generates robust, stable free cash flow. Management has not only demonstrated an ability to outperform the traditional radio broadcast market, but also leverage iHeart's brand/platform to leadership positions in emerging audio formats such as podcasting and streaming.”
IHRT is another stock with a Strong Buy consensus rating, buoyed by 4 Buys against a single Hold. Shares are selling for $15.01, and the $20.50 average price target suggests an upside potential of 37%. (See iHeartMedia stock-price forecast on TipRanks)
Tencent Music Entertainment Group (TME)
The final stock on our list is a big name in China. Tencent Music is the online music entertainment platform operated by China’s video game and online venture company Tencent in a join partnership with Spotify. Tencent Music offers a variety of apps, which have a combined 700 million active users and 120 million paying subscribers. TME has been trading publicly since December 2018.
TME is expected to report a 9-cent EPS for Q4 when it releases quarterly financial information on March 16. If it meets expectations, this will be a hefty jump up from one year ago, when it reported a net loss of 7 cents per share.
With all of that, TME shares are down 33% in the past 12 months. Oppenheimer analyst Bo Pei explains why in a research note on the company: “Shares are likely to be range-bound on uncertain live streaming regulations and increasing competition with short video platforms. We expect in-line 4Q results but are lowering 2020 estimates. TME is expected to cease master licensing agreement with one of the Big Three labels, which should further weigh on its sublicensing revenue and content cost savings likely offset by higher live streaming costs. Therefore, although we believe TME's music subscription business (15% of revenue) will continue to perform well, we see meaningful negative estimate revisions for Live Streaming (50% of revenue) and Sublicensing (15% of revenue) over the next earnings cycle and suggest investors wait for a better entry point.”
Pei downgrades his stance on TME to a Hold, and removes his previous price target, declining to set one for now. (To watch Pei’s track record, click here)
With 7 analyst ratings, including 3 Buys and 4 Holds, TME gets a Moderate Buy from the analyst consensus. Shares are selling for $12.15, and the average price target of $15.62 suggests a 29% upside potential in coming months. (See Tencent Music stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
After the last few trading sessions, with the markets taking a nose-dive, investors can be excused for wondering if they’re doing something wrong. They’re not. Markets run in cycles, and are sensitive to Black Swan events, two factors that are on market watchers’ minds.
The economic expansion is in its eleventh year, a record streak. But with that longevity comes the worry – how much longer can this last? As for the Black Swans, the unpredictable events that hit the market but no one saw coming, one is in play right now. The coronavirus outbreak – emerging from China and now cropping up around the world – is disrupting trade and travel, with governments imposing quarantines and travel restrictions to try and cope as health officials warn that a pandemic could be on the horizon.
This all just brings us back to the question: how do you find investment-grade stocks in a volatile market? There isn’t one sure answer; plenty of investment strategies can steer you toward profits. But there is one possibility that might make investing easier – just follow the insiders.
Insiders – the corporate officers, board members, and others ‘in the know’ – don’t just manage the companies, they know the details. Legally, they are not supposed to trade that knowledge, or to blatantly trade on it, and disclosure rules by government regulators help to keep the insiders honest. Their honest stock transactions, however, can be highly informative. These are the people with the deepest knowledge of particular stocks. So, when they buy or sell, especially in bulk, take note!
TipRanks has the tools to help you do just that. The Insiders’ Hot Stocks page shows which stocks top insiders are most active on, for both purchases and sales. You can sort insider trades by a variety of filters, including trading strategy. We’ve done some of the legwork for you, and pulled up three stocks with recent informative buy-side transactions. Here are the results.
Bunge, Ltd. (BG)
The first stock we’ll look at is Bunge, a global player in the food and agriculture market. Bunge works with oilseeds and grains used to make high-protein feed for livestock, as well as edible oils for commercial customers. The company buys and sells, stores, transports, and processes the raw materials for the end products. In addition, Bunge has operations in the sugar business, with sugarcane, wheat, and corn growing operations, mills, and ethanol processing facilities.
Bunge’s niche is a profitable one, and it has consistently beaten earnings expectations over the past four quarters. The company’s Q4 beat, reporting EPS of $1.27 against a 22-cent forecast, was particularly strong. Consensus for the next report, due in the spring, is for 82 cents EPS.
Bunge also offers investors a nice dividend. The payment, of 50 cents quarterly, annualizes to $2, and gives a yield of 4.3%. Not to mention BG’s dividend history is reliable, 18 years long and going strong.
In recent days, no fewer than four insiders have made informative purchases on BG stock. These insiders include the CEO, CFO, and a member of the company’s Board of Directors – all high-level officers. Their transactions range in size from 3,750 shares worth over $199,000 to 37,000 shares now worth almost $2 million. Stock purchases on this level are more than just adjusting holdings for compensation purposes. And it gives BG stock a very positive confidence signal.
This becomes clear when we consult with the analysts. 5-star analyst Kenneth Zaslow writes about BG for BMO Capital, saying, “BG’s EPS of $1.27 far exceeded consensus, as risk management, plant optimization, asset sales, and efficiency programs enabled BG to capture select opportunities, higher crush volumes, improved utilization rates, and strong oil margins… We are designating BG as our ‘Top Pick’ for 2020…”
Zaslow backs his Buy rating with a $72 price target, implying an upside potential of 53%. (To watch Zaslow’s track record, click here)
Even with just one recent Buy rating, BG shares are still looking strong. The stock’s average price target of $67 suggests a 43% upside from the share price of $46.87. (See Bunge stock analysis on TipRanks)
Simply Good Foods Company (SMPL)
Next up is food and snack company Simply Good Foods, a mid-cap player formed just three years ago as the fruit of a corporate merger. It operates in the states of Connecticut and Colorado, offering a range of nutritional snack foods including confectionery products, ready-to-drink shakes, and nutrition bars.
SMPL released its fiscal Q1 results last month, and showed its third earnings beat in the last four quarters. EPS was 4.7% above estimates, at 22 cents, while revenue reflected a 26% annual gain and was reported at $152.15 million.
Two of SMPL’s board members have bought heavily into the stock this month. The buys range from 10,000 shares to 89,000, and the dollar amounts range from $229,700 to $1.99 million. These purchases are interesting considering the company’s recent acquisition of a competitor. SMPL paid out $1 billion in cash and credit to buy Quest Nutrition. Despite adding some $460 million to its loan balance, SMPL was still able to post impressive quarterly results. It’s a piece of public information that helps to underline the Directors’ confidence.
Wall Street is also confident in this company. Writing from Wells Fargo, 4-star analyst John Baumgartner says, “…we see an increasingly favorable 12-month risk/reward. We reiterate our thesis that FY20 revenue is setting up for a beat-and-raise path for both legacy Atkins and Quest…”
Baumgartner places a Buy rating here, along with a $35 price target that indicates room for 59% upside growth. (To watch Baumgartner’s track record, click here)
Deutsche Bank’s Faiza Alwy is also bullish. Alwy writes, “…solid trends in core bar and confection categories are helping drive robust growth. For legacy Atkins, this growth is entirely driven by velocity and attracting new consumers to the category who are focused on healthy eating – a trend that seems poised to continue longer-term.”
Alwy’s price target of $32 implies a 45% possible upside to back a Buy rating. (To watch Alwy’s track record, click here)
With 3 recent Buy-side ratings, SMPL gets a Strong Buy rating from the analyst consensus. Shares are selling for $22.06, and the $33 average price target suggests an upside growth potential of 50%. (See Simply Good Foods stock analysis on TipRanks)
AquaBounty Technologies, Inc. (AQB)
Last on our list today is a dollar stock. AquaBounty, based in Massachusetts, is a biotech company that focuses on genetically modified fish for farming. In short, AQB develops faster growing fish to make fish farming both more productive and more profitable. The company’s salmon has been approved for sale by both the US and Canadian governments. AquaBounty is also working on trout and tilapia strains.
Earlier this month, the company announced a drive to raise capital through a sale of common stock. The offering was for 9 million shares at $1.50 each. A few days later, board member Randal Kirk purchased over 5 million shares at $1.50. Kirk is a 10%-plus owner of the company. An informative buy, indeed – Kirk’s purchase can be taken as a signal of confidence.
AQB won’t report Q4 earnings until next week, but in Q3, the company beat the forecast by 22%. Looking ahead, the consensus is for continued improvement at the bottom line, as the company’s net loss moderates to just 1 cent per share.
AquaBounty has only one recent analyst review, by Ben Klieve of National Research. Klieve’s $5 price target on the stock shows the degree of his confidence: it implies an upside growth potential of 184% for AQB. That’s a fast-growing fish. (To watch Klieve’s track record, click here)
Klieve writes of the stock, “We believe in advance of its first harvest that the company will be able to formally announce customers are in hand, which we believe will not only better enable expansion but will also be a significant catalyst for the stock.” (See AQB price targets and analyst ratings on TipRanks)