This year, investors stepped up the shares of legacy television content companies, as these companies switched their businesses to streaming video services directly to the consumer. But these entertainment stocks have fallen sharply in the past few days, as Wall Street analysts have plunged.
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On Friday, Steven Cahall, an analyst at Wells Fargo, downgraded three entertainment stocks: AMC Networks (AMCX), Discovery (DISK) and ViacomCBS (VIAC). He reduced his ratings on AMC and ViacomCBS to equal weight underweight. Cahall went from overweight to Discovery. He cut his price targets on all three.
The ratings were extended to all three because of investor enthusiasm for their streaming strategies, Cahall said in a note to customers.
“We believe that non-core investments have recently generated massive rallies at AMCX, DISCA and VIAC,” said Cahall. “Companies are better off than in 2020 due to DTC (direct to consumer), but there is a lot of risk to justify recent assessments.”
Entertainment stocks fall
In the stock market today, AMC’s shares plunged 11.3% to 54.01. On March 15, it reached a high of 83.63 in more than 5 years.
Meanwhile, Discovery dropped 27.5% to 41.90 and ViacomCBS fell 27.3% to 48.23. Discovery reached a record high of 78.14 on March 19. ViacomCBS reached a record high of 101.97 on March 15.
Elsewhere among entertainment stocks, the leader of Internet television Netflix (NFLX) rose 1% to 508.05. Netflix’s stock hit a record high of 593.29 on January 20.
On Thursday, research firm MoffettNathanson downgraded ViacomCBS to sell neutral. Reduced the target price of VIAC shares from 67 to 55.
Discovery, ViacomCBS Called ‘Overvalued’
Among other entertainment actions, MoffettNathanson reiterated his purchase ratings on Discovery and Fox (FOXA). It has neutral ratings on AMC, Netflix and Walt Disney (DIS).
On Tuesday, investment bank UBS downgraded Discovery to sell neutral on the valuation. Maintained a sales rating on ViacomCBS.
Last week, Macquarie Research called Discovery and ViacomCBS “overvalued” and downgraded both shares from neutral to underperforming.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories about consumer technology, software and semiconductor stocks.
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