In this article, we will look at the 5 media stocks that got crushed in 2022. If you want to explore similar stocks, you can also read “First digital advertising recession”: 10 Media Stocks Crushed in 2022.
5. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 113
Year to Date Loss as of August 5: 31.98%
While The Walt Disney Company (NYSE:DIS) is having a tough year in 2022 because of macro headwinds, analysts are positive on the company’s ability to drive outperformance. On July 26, Goldman Sachs analyst Brett Feldman slashed his price target on The Walt Disney Company (NYSE:DIS) to $130 from $148 and reiterated a Buy rating on the shares. The analyst cut his price target to reflect the negative historic correlation between macro trends and the TV advertising industry.
On July 27, Evercore ISI analyst Vijay Jayant lowered his price target on The Walt Disney Company (NYSE:DIS) to $130 from $150 and maintained an Outperform rating on the shares. The analyst likes the company’s “credible streaming strategy”.
As of August 5, The Walt Disney Company (NYSE:DIS) has plummeted by 31.98% year to date.
At the close of Q1 2022, 113 hedge funds were long The Walt Disney Company (NYSE:DIS) and held stakes worth $5.16 billion in the company. This is compared to 111 hedge funds in the previous quarter with stakes worth $6.94 billion.
As of June 30, Markel Gayner Asset Management owns over 1.9 million shares of The Walt Disney Company (NYSE:DIS) and is the largest shareholder in the company. The investment covers 2.65% of the fund’s 13F portfolio.
Here is what Oakmark Funds had to say about The Walt Disney Company (NYSE:DIS) in its second-quarter 2022 investor letter:
Disney (NYSE:DIS) is one of the most beloved consumer companies in the world. Its media business has a rich library of intellectual property, which provides a powerful engine for creating new content across the Disney, Pixar, Marvel, and Star Wars brands. This content also contributes to the success of Disney’s theme parks, which generated nearly half the company’s earnings and grew more than 10% annually in the decade prior to the pandemic. Shares have fallen nearly 50% over the past year as investors worried about the company’s ability to transition its media business to a direct-to-consumer streaming world. This transition has required management to make investments in its Disney+ streaming service that are depressing profitability today. However, we believe these investments will ultimately produce attractive returns as Disney+ continues to grow subscribers and increase pricing over time. As a result, we were able to purchase shares at a substantial discount to our estimate of intrinsic value.”
4. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Number of Hedge Fund Holders: N/A
Year to Date Loss as of August 5: 42.78%
Warner Bros. Discovery, Inc. (NASDAQ:WBD) provides content across various distribution platforms in approximately 50 languages worldwide. . The company owns and operates various television networks including Discovery Channel, Animal Planet, MotorTrend, and Eurosport among others. As of August 5, Warner Bros. Discovery, Inc. (NASDAQ:WBD) has dipped by 42.78% year to date.
On August 5, Barclays analyst Kannan Venkateshwar slashed his price target on Warner Bros. Discovery, Inc. (NASDAQ:WBD) to $17 from $19 and reiterated an Equal Weight rating on the shares. The analyst noted that limited near-term catalysts and execution risk may result in Warner Bros. Discovery, Inc. (NASDAQ:WBD) trading at discount levels persistently.
On August 4, Warner Bros. Discovery, Inc. (NASDAQ:WBD) slashed its 2022 adjusted EBITDA guidance to a range between $9.0 and $9.5 billion, down from its prior guidance of $10 billion, due to a negative macroeconomic backdrop which is impacting ad sales, and a change in the streaming industry dynamics.
As of March 31, Laurion Capital Management owns roughly 13.58 million shares of Warner Bros. Discovery, Inc. (NASDAQ:WBD) and is the largest shareholder in the company. The fund’s stakes were valued at $338.41 million and the investment covers 4.13% of its investment portfolio.
Here is what Silver Ring Value Partners, an investment management firm, had to say about Warner Bros. Discovery, Inc. (NASDAQ:WBD) in its first-quarter 2022 investor letter:
“Discovery completed the acquisition of the Warner Media business from AT&T in April, and the combined business is now named Warner Brothers Discovery. We are currently in the middle of an interesting technical event, following the spin-off special situation playbook.
The acquisition was structured as a spin-off of Warner Media, with AT&T shareholders receiving ~ 70% of the shares in the combined entity, or ~ 1.7B shares. Many of these shareholders owned AT&T for its phone business and its dividend. It appears that there has been elevated noneconomic selling as these shareholders exit regardless of price. On the other side, few if any investors want to buy the WBD shares prior to this forced selling being over.
This has caused the stock to decline substantially despite being already priced at a low valuation and reporting good recent results. The people selling aren’t likely considering either of those factors, which is what creates the opportunity. One wrinkle as compared to the usual spin-off special situation setup is that the non-economic selling is likely to last for some time given the retail nature of the shareholder base. This is different from the typical pattern where there is a quick sharp sell-off as institutional investors dump their shares quickly following the spin.
In anticipation of this situation, I had sold our equity prior to the major declines, and replaced it with January 2024 call options. I have since been using a portion of the cash generated from the equity sale to add to the option position as the stock price declines. While this does give up some time horizon, which I am usually loathe to do, both the technical selling and the question of the success of the merger integration are likely to be resolved well before then.
If I am correct and this is a much more valuable business than the market is giving it credit for, we will make a hefty profit. If I am wrong, and the combination of financial leverage, merger integration problems and secular risks are more serious than I foresee, we will have a moderate loss. I like our odds and the asymmetry of risk vs. reward.”
3. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Holders: 49
Year to Date Loss as of August 5: 51.37%
On July 27, Spotify Technology S.A. (NYSE:SPOT) reported earnings for the fiscal second quarter of 2022. The company reported a loss per share of $0.66 and missed Wall Street expectations by $0.02. The company’s revenue for the quarter came in at $2.92 billion and beat revenue estimates by $62.57 million. As of August 5, Spotify Technology S.A. (NYSE:SPOT) has lost 51.37% of its value year to date.
On July 27, Spotify Technology S.A. (NYSE:SPOT) announced that it is cutting its hiring growth by 25% for the rest of 2022 and is monitoring macroeconomic conditions. Even though the company is currently facing macro headwinds, Wall Street analysts are bullish on the stock. On July 28, Citi analyst Jason Bazinet lowered his price target on Spotify Technology S.A. (NYSE:SPOT) to $145 from $150 and maintained a Buy rating on the shares. The analyst noted that the stock’s risk/reward ratio is compelling at current levels.
At the end of the first quarter of 2022, 49 hedge funds were bullish on Spotify Technology S.A. (NYSE:SPOT) and held stakes worth $1.90 billion in the company. This is compared to 53 positions in the previous quarter with stakes worth $3.46 billion. The hedge fund sentiment for the stock is negative.
In the second quarter of 2022, ARK Investment Management reduced its position in Spotify Technology S.A. (NYSE:SPOT) by 54%, bringing its stakes to $230.43 million. As of June 30, Catherine D. Wood’s hedge fund owns roughly 2.04 million shares of Spotify Technology S.A. (NYSE:SPOT) and is the most prominent shareholder in the company.
Here is what Rowan Street Capital LLC had to say about Spotify Technology S.A. (NYSE:SPOT) in its second-quarter 2022 investor letter:
“Spotify (NYSE:SPOT) disrupted the music industry and brought it back to life via streaming.
Daniel Ek, Spotify Founder and CEO
Visionary entrepreneur who set out to reimagine the music industry and to provide a better way for both artists and consumers to benefit from the digital transformation of the music industry. He beat Apple, Amazon, Pandora to become the largest music streaming platform. Daniel owns 17% of the company, and his co-founder Martin Lorentzon owns 11%.
When Spotify went public in 2018, they were a music-streaming company, but they have evolved dramatically over the last four years. Daniel Ek’s ambitions did not stop at music, as Spotify is focused on building the global audio infrastructure of the Internet. They are continuing to expand and build on the strong foundation in music, applying their learnings and leveraging their leading 420 million user base to move into new verticals like podcasting and audiobooks, ultimately broadening their value proposition. As a result, they are building a more resilient business. For example, in three years, Spotify has gone from basically zero to being the market leader in podcasting – a business that we believe will enable a large influx of high-margin revenue through advertising and direct monetization. Just as video content is a trillion-dollar opportunity, we view audio through a similar lens. Spotify has the potential to become the Google of audio.
We believe Spotify is one of the most relevant digital platforms in existence today, as it has transformed itself to a fully-fledged platform where artists and creators can create, engage, and earn. A platform fueled by subscription, advertising and creator service models, applied to music, podcasts, audiobooks and more. At a current market value of just $20 billion, we think Wall Street is not appreciating the true long-term potential of the Spotify Machine.”
2. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 109
Year to Date Loss as of August 5: 62.04%
On July 19, Netflix, Inc. (NASDAQ:NFLX) reported earnings for the fiscal second quarter of 2022. The company reported earnings per share of $3.20 and beat EPS estimates by $0.25. The company’s revenue came in at $7.97 billion, short of Wall Street expectations by $63.85 million. The company lost nearly 1 million global subscribers in the second quarter of 2022. As of August 5, Netflix, Inc. (NASDAQ:NFLX) has dipped by 62.04% year to date.
This July, Morgan Stanley analyst Benjamin Swinburne raised his price target on Netflix, Inc. (NASDAQ:NFLX) to $230 from $220 and reiterated an Equal Weight rating on the shares. On July 20, Wedbush analyst Michael Pachter reiterated his Outperform rating and $280 price target on Netflix, Inc. (NASDAQ:NFLX). The analyst said that the company is reacting “appropriately” to macroeconomic headwinds by lowering costs to facilitate slower revenue growth. Pachter also noted that Neflix, Inc. (NASDAQ:NFLX) has directed its focus to free cash flow generation as the company positions itself to drive profitability amid relatively low levels of revenue growth.
At the end of Q1 2022, 109 hedge funds were eager on Netflix, Inc. (NASDAQ:NFLX) and held stakes worth $9.70 billion in the company. This is compared to 113 positions in the previous quarter with stakes worth $14.47 billion. The hedge fund sentiment for the stock is negative.
As of June 30, Gardner Russo & Gardner owns roughly 0.52 million shares of Netflix, Inc. (NASDAQ:NFLX) and is the largest shareholder in the company. The fund’s stakes are valued at $91.08 million.
Here is what Oakmark Funds had to say about Netflix, Inc. (NASDAQ:NFLX) in its “Oakmark Fund” second-quarter 2022 investor letter:
“Netflix‘s stock price was down considerably after providing a weaker than expected outlook for both subscriber growth and profit margins. After meeting with management and scrutinizing our investment thesis, we lowered our estimate of business value to account for the company’s softer near-term guidance. However, we believe the decline in the company’s share price more than adjusts for this. Indeed, Netflix now trades for a discount to the S&P 500 Index on next year’s GAAP earnings despite our view that the company remains a much better than average business run by a highly accomplished management team. We believe the company’s lead in streaming remains intact and we expect terminal operating margins to be substantially higher than they are today. Furthermore, we are encouraged by Netflix’s potential to enhance revenue growth through advertising, the monetization of password sharing and further penetrating international markets.”
1. Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders: 34
Year to Date Loss as of August 5: 64.72%
Roku, Inc. (NASDAQ:ROKU) operates a TV streaming platform. Its platform allows users to discover and access various movies and TV episodes, as well as live TV, news, sports, shows, and others. On July 28, Roku, Inc. (NASDAQ:ROKU) reported earnings for the fiscal second quarter of 2022. The company reported a loss per share of $0.82 and missed expectations by $0.13. The company’s revenue amounted to $764.41 million and was short of estimates by $40.24 million. As of August 5, Roku, Inc. (NASDAQ:ROKU) has lost 64.72% of its value year to date.
Wall Street is bearish on Roku, Inc. (NASDAQ:ROKU) and sees trouble for the company ahead. On July 29, BofA analyst Ruplu Bhattacharya double downgraded Roku (NASDAQ:ROKU) to Underperform from Buy and slashed his price target to $55 from $125. The analyst noted that Roku, Inc.’s (NASDAQ:ROKU) revenue growth estimates for the fiscal years 2022 and 2023 have been cut to 11% and 12% year over year, from 25% to 33%, respectively. The analyst noted that inflation, recession, and supply chain headwinds are expected to last for the next two to three quarters, and a worsening macro environment will lead to further downgrades and lowered forecasts. On August 1, Morgan Stanley analyst Benjamin Swinburne trimmed his price target on Roku, Inc. (NASDAQ:ROKU) to $55 from $80 and reiterated an Underweight rating on the shares.
At the end of Q1 2022, 34 hedge funds held stakes in Roku, Inc. (NASDAQ:ROKU) worth $1.72 billion. This is compared to 43 hedge funds in the previous quarter with stakes worth $2.23 billion. The hedge fund sentiment for the stock is negative.
As of June 30, ARK Investment Management owns more than 10.1 million shares of Roku, Inc. (NASDAQ:ROKU) and is the top shareholder in the company. The investment covers 5.69% of the fund’s 13F portfolio.
You can also take a look at 10 Best Streaming Stocks to Buy Now and 15 Biggest Media Companies.
