3 Media Stocks to Take a Look At
Cecil is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Media is traditionally a fairly volatile industry. For instance, newspaper companies were once considered to be extremely stable stocks, but don’t have the same appeal anymore thanks to the digital information age. Advertising in newspapers nowadays doesn’t seem to hold too much appeal thanks to a low reader base. Lack of advertising for newspapers essentially spells death for them. However, this isn’t true for all companies in the media space. So let’s take a look at three companies who seem to show potential in this industry.
The Interpublic Group of Companies (NYSE: IPG) is a global advertising and marketing services company. The company has a one year low of $8.27 and a one year high of $12.17. The company reported Q3 earnings late last month with earnings per share at $0.15, as opposed to analyst’s estimates of $0.17 on revenue of $1.67 billion for the quarter. The company’s revenue was down 3.2% on a year over year basis. Interpublic has a market cap of $4.279 billion and a price-to-earnings ratio of 12.84.
Analysts recently weighed in on the company, with Nomura reiterating a “buy” rating on shares with a $12 price target. Deutsche Bank cut their price target from $15 to $14.50, but they still have a “buy” rating on the stock. RBC Capital reiterated an “outperform” rating on shares of Interpublic Group of Companies in a research note to investors on Monday. They now have a $15.00 price target on the stock.
Most analysts expect IPG to do well, despite not performing up to expectations in the third quarter. The company has good digital capabilities, a strict cost control mechanism, and is investing in new businesses. Cost management techniques and a strong liquidity position are expected to keep the company ahead of the competition. Interpublic has a market cap of $4.279 billion and a price-to-earnings ratio of 12.84.
Regal Entertainment (NYSE: RGC) posted its third quarter earnings on Oct. 25. The theater chain reported revenue of $692.9 million for the third quarter, down from $743.6 million for the same quarter the previous year and below analyst expectations. The report of $0.15 diluted earnings per share was also a disappointment, according to analysts' consensus projections. The company saw a good strong start to the quarter, especially with the performance of The Dark Knight Rises, but then faced many challenges such as the fallout from the Colorado shootout, competition from Olympic Games in August, and poor September releases.
Additionally, a decline in box office revenue generated by 3D films had an impact on the industry's third quarter results. The company has a P/E of about 21, which is slightly high, but should do well in the holiday season with some good movies set to be released, including the prequel to Peter Jackson’s Lord of the Rings, The Hobbit.
IMAX Corporation (NYSE: IMAX) is also expected to benefit from the holiday season releases. Giant movie system maker IMAX Corp's third-quarter profit rose 79%, driven mainly by strong box office revenue and continued global network growth. IMAX, which designs and produces cameras and projection equipment for its namesake motion picture film format, said revenue rose 20% to $80.7 million. IMAX’s strong global presence improved thanks to the company signing contracts for 41 theaters globally and 33 theaters in the third quarter. The company said it expects to install another 110 to 125 theatres in 2013. It has more than 660 theaters operating in over 52 countries worldwide.
The company is highly valued, which is reflected in a P/E of about 43; but IMAX has also seen the stock price rise 12.5% in the previous month, thereby justifying the high valuation. The company’s international arm will see strong potential in China, which is set to become the second largest film market after the US. IMAX technology puts it apart from any other regular theater, but there is inherent risk in the fact that it is dependent on the quality of movies it adds to its repository.
ceciljohn2002 has no positions in the stocks mentioned above. The Motley Fool owns shares of Imax. Motley Fool newsletter services recommend Imax. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.