Four long months.
That’s the amount of time since the initial strikes by Hollywood writers and actors began. Not only is it hurting workers in the industry, but it’s also taking a toll on the media production companies. Additionally, they are the ones that market films and television shows.
Production on new content remains at a standstill, and actors are refusing to promote movies that are completed and slated to be released. The entire entertainment industry has been thrown into turmoil.
The major film and TV studios do have an offer on the table. However, no indicators are showing that writers’ and actors’ unions are willing to accept it or plan a counter-offer. At the same time, new releases are being pushed out to next year.
In future quarters, the shortage of new material is likely to hurt the bottom lines of the major studios. And companies that are focused on streaming services will also take a hit. As the situation looks to be worsening, we offer three media stocks to sell as the Hollywood strike drags on.
Walt Disney Co. (DIS)
Shares of Walt Disney Co. (NYSE:DIS) just closed at their lowest level in nine years as investors turn increasingly bearish on the media company. Disney’s stock fell 4% on August 24 amid a broad stock market selloff, closing at $82.47 per share.
The last time DIS stock was this low was in October 2014. Worse, traders and investors are betting the the stock will fall further. According to data from analytics firm Trade Alert, an excessive amount of “put” contracts are betting that Disney’s stock will drop below $80 per share by mid-September.
Investors and traders seem unimpressed with Disney’s turnaround plan, which has involved price hikes across its streaming services and aggressive cost cuts. The company’s lackluster second-quarter financial results did nothing to inspire confidence in the Mouse House. DIS stock has slid more than 5% since the Q2 earnings print on August 9.
The longer the Hollywood strike drags on, the worse the situation could become for Disney’s content pipeline. Calls are growing to break-up the business and sell the legacy television channels.
DIS stock has declined 30% over the last 12 months and is now down 25% through five years, making it a media stock to avoid.
Warner Bros. Discovery (WBD)
With its share price down nearly 50% since its April 2022 market debut, media giant Warner Bros. Discovery (NASDAQ:WBD) also looks like a media stock to sell.
The Hollywood strike hit the company directly with a recent announcement. It’s delaying the release of its science fiction film “Dune: Part Two” until March 2024, pushing back from its original November 3 release date. Considering that “Dune: Part One,” released in 2021, earned $402 million at the global box office, the sequel’s delay could impact Warner Bros. bottom line.
Also, WBD stock has been plagued by declining subscriber numbers. The company announced as part of its second-quarter earnings that its worldwide streaming subscribers stood at 95.8 million as of June 30. This marks a significant decline of nearly two million from this year’s recent Q1. Worse yet, the company is laboring under a huge amount of debt, which stood at $47.8 billion at the end of Q2 versus $3.1 billion of cash on hand.
Hence, a lack of new content due to the Hollywood strike is unlikely to help the company or its stock moving forward.
Paramount Global (PARA)
Even shareholder Warren Buffett commented on the dividend cut at this year’s annual meeting of his holding company Berkshire Hathaway (NYSE:BRK.A/ NYSE:BRK.B). However, with PARA stock down 72% over the last five years, the media company’s troubles go beyond its dividend payout to stockholders.
Paramount Global has been trying to streamline its business, offloading non-core assets as it moves to focus on core film production and streaming units. In early August, the company announced it had reached a deal to sell book publisher Simon & Schuster to private equity firm KKR (NYSE:KKR) for $1.62 billion.
However, that announcement was made alongside Q2 results showing Paramount’s revenue declined 2% to $7.6 billion, pulled lower by a decline in advertising spending. Therefore, PARA is a media stock to sell.
On the date of publication, Joel Baglole held a long position in DIS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.