A dismal week on Wall Street buffeted showbiz stocks despite an uninspired rally Friday that saw the hardest-hit shares crawl up from their recent lows.
Conflicting economic data dribbled out nearly every morning. We learned, again, that consumer confidence is diminished and the economy slow — facts that continue to erode the advertising market and keep investors in a state of disenchantment with ad-dependent media congloms.
AOL Time Warner and Viacom both were bloodied, each falling 10% for the week to close, respectively, at $37.46 and $42.44. News Corp. dropped 9% to finish at $32.55. Walt Disney ended the week off 4.3% at $25.49, but that’s after it dipped to a new 52-week low of $24.42 Thursday.
Viacom still appears to be Wall Street’s favorite based on the dubious distinction, according to one analyst, of having the greatest exposure to advertising. The logic is that Viacom stock will pop first and fast once an uptick is sighted.
Upturn a ways off
Pundits now predict an upturn in the second quarter of next year — but then again, they’ve shown remarkable agility in revising projections that proved overly optimistic. What happened to the recovery that was supposed to be under way now? (There will be an upturn at some point, so eventually they’ll be right. But that’s not very reassuring.)
With no relief in sight, congloms surely are praying to the movie gods for stunning winter box office to pump up revenue and counter the slowdown of their ad-dependent broadcast, cable and publishing holdings. Pics of promise include “Harry Potter and the Sorcerer’s Stone” (Warner Bros.), “Monsters, Inc.” (Pixar/Disney), “The Fellowship of the Ring” (New Line), “Gangs of New York” (Miramax), “Vanilla Sky” (Paramount), “Training Day” (Warner Bros.), “Adaptation” (Sony) and “The Royal Tenenbaums” (Disney).
If the big guns don’t satisfy, investors may want to try sifting though some of media’s smaller stocks. Some second-tier showbiz shares have been unlikely winners.
Theater chain AMC, the sole publicly traded survivor of the beleaguered exhibition biz, has seen its stock rise nearly 200% this year. Most investors would consider themselves blessed to see that kind of return over a decade.
Video rental giant Blockbuster is up 155% this year, even as video-on-demand casts a looming shadow — and that’s nothing compared with the gains of its two main rivals, No. 2 Hollywood Video and No. 3 Movie Gallery. They’re up more than 1,000% and 700%, respectively. Fund managers call Hollywood a “10-bagger” — a stock that rises 10-fold.
TV station group Granite Broadcasting has risen more than 100% since January. Activision, the video and computer game publisher, has jumped 150%.
Smaller but still eye-popping results come from vidgame publisher 3DO, up more than 80%; megaplex owner Entertainment Properties Trust, up 55%; Playboy Enterprises, up 54%; and film and video processor Rank, up nearly 50%.
But before you reach for the phone or get online to contact your broker, heed a warning from Laura Martin, an entertainment industry analyst with CS First Boston, who doubts such big returns are any real guide to the future. Many stocks were unusually low at the beginning of the year, with some companies verging on bankruptcy, she points out.