In this article, we discuss 12 best entertainment stocks to buy in 2023. If you want to see more stocks in this selection, check out 5 Best Entertainment Stocks To Buy In 2023.
It is projected that the media and entertainment industry will continue to undergo transformations in 2023. As per Deloitte, both studios and video streaming services must deal with the challenge of market disruption, attempting to generate profits in a less lucrative business environment. They are not only vying against each other for audience attention, time, and revenue, but also against social media, user-generated content, and video games. The latter have advanced more rapidly and have remained popular among younger age groups.
Ernst and Young believes that there will be an increase in mergers and acquisitions within the media industry, as well as more deliberate partnerships and collaborations. EY highlighted many new trends for the media industry in 2023. The firm noted that to achieve sustained success in streaming, it is crucial to establish a strong and enduring relationship with subscribers. Many media companies currently operating in the direct-to-consumer (DTC) market are following the lead of the successful cable TV model by offering bundled packages of streaming content and other services. By doing so, these companies can not only increase the number of new subscribers and reduce the rate of subscriber loss, but also enhance the lifetime value of each subscriber. Bundling can also help to optimize marketing expenses and technology investments, thereby increasing efficiency. Moreover, investors are increasingly pushing for profitability in the direct-to-consumer (DTC) market, which is likely to spur further consolidation within the industry. This is particularly true for the smaller players who depend on the revenue generated by declining linear assets, and who are facing mounting pressure to adapt to the changing market dynamics.
Despite some positive developments for major blockbuster films in theaters this year, the movie industry as a whole is undergoing a significant restructuring. According to BoxOfficeMojo.com, box office revenue has declined by more than 30% compared to pre-pandemic years. The total number of films released in 2022 is also significantly lower than the average for the previous decade, resulting in fewer options for consumers who are considering going to the theater, which in turn is leading to a decrease in overall admissions. As a result, studios are reassessing which types of movies are economically viable for a theatrical release, versus those that would be better suited for a direct-to-streaming approach.
Similarly, EY thinks that although the initial hype surrounding NFTs and the concept of a metaverse-driven future may have dwindled in late 2022 due to the dominance of macroeconomic factors, media companies are still gearing up for the next era of interactivity. These companies are focusing on strategic planning, research and development, consumer research, and technology investment to ensure that they remain flexible as the metaverse becomes more tangible.
Streaming video, social media, and gaming are facilitating the emergence of new business models and transforming the media and entertainment landscape. However, the primary trend to watch out for in 2023 is the growing interdependence of these three sectors, as they become integral components of a more comprehensive and diverse media and entertainment ecosystem. Some of the best entertainment stocks to buy in 2023 include The Walt Disney Company (NYSE:DIS), Sea Limited (NYSE:SE), and Caesars Entertainment, Inc. (NASDAQ:CZR).
Our Methodology
We scanned Insider Monkey’s database of 943 hedge funds and picked the top 12 companies that provide services in the entertainment sector with the highest number of hedge fund investors. These are the best entertainment stocks to buy according to hedge funds.
Roku, Inc. (NASDAQ:ROKU) runs a TV streaming service with its subsidiary companies. The company is divided into two sections, Devices and Platform. Through its streaming platform, users can search for and watch TV shows, movies, sports, news, and other content. In Q4 2022, Roku, Inc. (NASDAQ:ROKU) reported a revenue of $867.06 million, beating market estimates by $64.2 million. Platform revenue increased 20% year-over-year to $2.7 billion, and active accounts reached 70 million, a net increase of 9.9 million active accounts from 2021.
On April 11, Vikram Kesavabhotla, an analyst at Baird, began coverage of Roku, Inc. (NASDAQ:ROKU) with a Neutral rating and a target price of $71. He also started covering other companies in the internet and digital services industry, citing specific advantages and risks in each category during the current economic climate.
According to Insider Monkey’s fourth quarter database, 30 hedge funds were bullish on Roku, Inc. (NASDAQ:ROKU), compared to 33 funds in the prior quarter. Cathie Wood’s ARK Investment Management is the largest stakeholder of the company, with 12 million shares worth $493 million.
Like The Walt Disney Company (NYSE:DIS), Sea Limited (NYSE:SE), and Caesars Entertainment, Inc. (NASDAQ:CZR), Roku, Inc. (NASDAQ:ROKU) is one of the best entertainment stocks to invest in.
Here is what Saga Partners has to say about Roku, Inc. (NASDAQ:ROKU) in its Q2 2022 investor letter:
“The Portfolio first bought Roku in Q3’20. It was a company we followed closely given our investment in The Trade Desk and its importance in connected television (CTV). Roku continued to impressively grow its CTV market share and it took some extra work to understand the underlying dynamics causing Roku’s success. I think there is some misunderstanding surrounding the connected television landscape. Since I haven’t written extensively on the topic in past letters, I thought it would be helpful to provide a little more background on the underlying dynamics of the space below…” (Click here to see the full text)
11. Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY)
Number of Hedge Fund Holders: 32
Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) manages dining and entertainment establishments for families and adults in North America. The venues serve a variety of food options including appetizers, entrees, and beverages, both alcoholic and non-alcoholic. They also provide a range of entertainment options, such as games, live sports, and televised events. It is one of the best entertainment stocks to invest in. On March 28, Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) reported a Q4 non-GAAP EPS of $0.80 and a revenue of $563.7 million, topping Wall Street estimates by $0.10 and $31.86 million, respectively.
On March 29, Truist analyst Jake Bartlett maintained a Buy rating on Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) but lowered the firm's price target on the shares to $60 from $62. The analyst mentioned that the company's Q4 comparisons were impressive, and the underlying demand seems stable. However, recent trends might have slowed down. Truist suggests purchasing the stock during a decline since sales at Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) are predicted to benefit from operational enhancements and the company's growth is progressing.
According to Insider Monkey’s fourth quarter database, 32 hedge funds were bullish on Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY), compared to 28 funds in the prior quarter. Scott Ross’ Hill Path Capital is the largest stakeholder of the company, with 7 million shares worth $252.3 million.
DraftKings Inc. (NASDAQ:DKNG) manages a digital sports entertainment and gaming enterprise, providing technologies for sports betting and gaming across multiple platforms. On February 16, DraftKings Inc. (NASDAQ:DKNG) reported a Q4 GAAP EPS of -$0.53 and a revenue of $855 million, beating market estimates by $0.05 and $55.75 million, respectively. The revenue increased approximately 81% on a year-over-year basis. It is one of the best entertainment stocks to watch.
On April 6, Argus analyst John Staszak maintained a Buy rating and a target price of $22 for DraftKings Inc. (NASDAQ:DKNG), stating that the company's revenue is anticipated to reach $3.1 billion in FY23, a significant increase from $323 million in FY19, due to the legalization of online sports betting in additional states. DraftKings Inc. (NASDAQ:DKNG) had previously estimated FY23 revenue at $2.95 billion, while consensus stands at $3.0 billion. The analyst also mentioned that DraftKings Inc. (NASDAQ:DKNG)’s decreasing customer acquisition costs are favorable for its long-term growth. Furthermore, DraftKings is expected to report its first profitable quarter in Q3 of FY24, with a projected earnings growth rate of 25% for the next five years.
According to Insider Monkey’s fourth quarter database, 32 hedge funds were long DraftKings Inc. (NASDAQ:DKNG), compared to 34 funds in the last quarter.
Here is what Baron Small Cap Fund has to say about DraftKings Inc. (NASDAQ:DKNG) in its Q4 2021 investor letter:
“Shares of DraftKings, Inc. fell in the quarter, as stocks of online gaming companies were under pressure. Sports betting and i-gaming are rolling out with great fanfare and success across the country; however, investors seem concerned about competition and margins. Most participants are spending heavily on marketing and promotions, which is cutting into margins. We see this as a worthy investment in customer acquisition at a moment in time when revenues are just building. We continue to believe that online sports betting and gaming will be enormous industries, that DraftKings will be a leading player. We think the business will have high margins as it matures. We believe we are underwriting the business conservatively and see much upside in the long term.”
World Wrestling Entertainment, Inc. (NYSE:WWE) is an entertainment and media organization that operates in the sports entertainment industry across North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. World Wrestling Entertainment, Inc. (NYSE:WWE) is divided into three segments – Media, Live Events, and Consumer Products.
On April 13, Morgan Stanley analyst Benjamin Swinburne raised the rating of World Wrestling Entertainment, Inc. (NYSE:WWE) from Equal Weight to Overweight and increased the price target from $105 to $120. The analyst believes that the combined WWE and UFC business, known as TKO, provides an attractive risk/reward opportunity for investors due to the favorable trends in sports and entertainment media rights revenues, live content, and the defensive characteristics of contracted revenue growth. According to the analyst, the pending UFC-WWE transaction generates value and a pure-play sports and entertainment equity. The firm anticipates clear cost synergies and substantial revenue opportunities.
According to Insider Monkey’s fourth quarter database, 32 hedge funds were bullish on World Wrestling Entertainment, Inc. (NYSE:WWE), compared to 27 funds in the earlier quarter. Robert Pohly’s Samlyn Capital is a prominent stakeholder of the company, with 893,909 shares worth $61.25 million.
Madison Square Garden Sports Corp. (NYSE:MSGS) is a professional sports organization that owns and operates a range of assets, including the New York Knickerbockers of the National Basketball Association and the New York Rangers of the National Hockey League. In addition to these two major professional franchises, Madison Square Garden Sports Corp. (NYSE:MSGS) also has two development league teams – the Hartford Wolf Pack of the American Hockey League and the Westchester Knicks of the NBA G League. It is one of the best entertainment stocks to invest in.
On April 6, Madison Square Garden Sports Corp. (NYSE:MSGS) announced that it is merging its esports activities, specifically Counter Logic Gaming, with NRG, a gaming and entertainment firm. The outcome will be a new entity headed by NRG's CEO and founder, Andy Miller. Madison Square Garden Sports Corp. (NYSE:MSGS) will maintain a non-controlling equity stake in the merged organization. The new firm will have esports teams competing in various leagues, such as League of Legends, Valorant, Overwatch, Apex Legends, and Rocket League.
According to Insider Monkey’s fourth quarter database, 33 hedge funds were long Madison Square Garden Sports Corp. (NYSE:MSGS), compared to 38 funds in the last quarter. Jim Davidson, Dave Roux, and Glenn Hutchins’ Silver Lake Partners is the biggest stakeholder of the company, with 1.9 million shares worth $348.3 million.
Ariel Small/Mid Cap Value Strategy made the following comment about Madison Square Garden Sports Corp. (NYSE:MSGS) in its Q4 2022 investor letter:
“Additionally, pure-play professional sports content company, Madison Square Garden Sports Corp. (NYSE:MSGS) rebounded following the recent sale of the Phoenix Suns (NBA). This recent share appreciation suggests MSGS’ franchises could realize outsized returns due to the prominence of the New York Knicks (NBA) and the New York Rangers (NHL) in the largest U.S. market, particularly given high demand and the large premiums other sports franchises have traded at.”
SeaWorld Entertainment, Inc. (NYSE:SEAS), along with its subsidiaries, operates as a theme park and entertainment company in the United States. On February 28, SeaWorld Entertainment, Inc. (NYSE:SEAS) reported a Q4 GAAP EPS of $0.76 and a revenue of $390.5 million, outperforming Wall Street estimates by $0.03 and $3.13 million, respectively. It is one of the best entertainment stocks to invest in.
On March 6, Deutsche Bank analyst Chris Woronka raised the firm's price target on SeaWorld Entertainment, Inc. (NYSE:SEAS) to $84 from $76 and reiterated a Buy rating on the shares. The analyst believes that the recent upswing in SeaWorld's stock price is due to the market's recognition that the company may not be "over earning" in 2022. Woronka noted that the company's management has expressed confidence in a simple growth strategy based on modest attendance and per capita spending increases, which will drive further margin expansion and EBITDA growth.
According to Insider Monkey’s fourth quarter database, 36 hedge funds were bullish on SeaWorld Entertainment, Inc. (NYSE:SEAS), compared to 39 funds in the prior quarter. Scott Ross’ Hill Path Capital is the largest stakeholder of the company, with 27.20 million shares worth $1.45 billion.
Boyd Gaming Corporation (NYSE:BYD) is a gaming company that operates in multiple jurisdictions including Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania. The company has three operating segments, which are Las Vegas Locals, Downtown Las Vegas, and Midwest & South. Boyd Gaming Corporation (NYSE:BYD) paid a $0.16 per share quarterly dividend on April 15, which is a 6.7% increase from its prior dividend of $0.15.
On April 18, Truist analyst Barry Jonas raised the price target for Boyd Gaming Corporation (NYSE:BYD) from $80 to $83 and maintained a Buy rating on the company's shares, as part of a wider research note previewing Q1 results in the gaming industry. The analyst's recent field trips to Houston and the Gulf Coast indicate positive trends in technology and stability from the real estate investment trusts (REITs), suggesting that the quarter should see mostly positive results. Truist also believes that the gaming sector has demonstrated its resilience and is likely to continue supporting a positive outlook for the industry.
According to Insider Monkey’s fourth quarter database, 39 hedge funds were long Boyd Gaming Corporation (NYSE:BYD), compared to 36 funds in the earlier quarter. John W. Rogers’ Ariel Investments is the biggest stakeholder of the company, with 3.4 million shares worth $188.5 million.
In addition to The Walt Disney Company (NYSE:DIS), Sea Limited (NYSE:SE), and Caesars Entertainment, Inc. (NASDAQ:CZR), elite investors are piling into Boyd Gaming Corporation (NYSE:BYD) for exposure to the entertainment sector.
Baron Discovery Fund made the following comment about Boyd Gaming Corporation (NYSE:BYD) in its Q4 2022 investor letter:
“Shares of U.S. regional casino operator Boyd Gaming Corporation (NYSE:BYD), increased in the fourth quarter due to stable consumer visitation and spending levels despite an uncertain macro environment. The company continued to generate strong free cash flow that it is using to invest into its casinos, pay out dividends, and buy back shares. The company has repurchased 8% of its shares over the past year while paying out a 1% dividend. We believe Boyd can withstand any bumps in the economy given its strong balance sheet and free cash flow. We also don’t think Boyd’s share price reflects its 5% ownership in online bookmaker FanDuel. We continue to be positive on the company’s long-term prospects.”
