The 4 Best Entertainment Stocks to Buy and Hold
I don’t know about you but I’ve never been more excited to do things. Should we carve a pumpkin? Absolutely we should. Go to Six Flags Fright Fest? Let’s do it. Want to see The Many Saints of Newark? I’ve never seen The Sopranos but 100% let’s go. And I’m not alone. That’s why entertainment stocks make so much sense right now.
It finally feels like we are starting to turn a corner from the height of the pandemic. Vaccines have been rolled out for a while and things are finally returning to normal. Of course, this also probably depends on the part of the country that you live in. However, in general, it just feels like there’s more positivity and excitement in the air.
If you’re interested in investing in entertainment stocks then this is fantastic news. I personally feel that entertainment stocks are about to come back in a big way. This is because most entertainment stocks spent the better part of the past two years bleeding money. If they were lucky then they were able to tread water and break even.
Now, we are set to enter another Roaring 20s period. In the coming years, attendance and money spent on live entertainment will likely surge way past even 2019 levels.
To help out, I’ve pulled a list of 4 of the best entertainment stocks to buy.
NOTE: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions.
Four Entertainment Stocks to Add to Your Portfolio
- LiveNation (NYSE: LYV)
- Roku (Nasdaq: ROKU)
- GameStop (NYSE: GME)
- Penn Entertainment (Nasdaq: PENN)
LiveNation
LiveNation is the world’s biggest live entertainment company. This alone qualifies them to be one of the top entertainment stocks to buy.
Every year, it organizes about 40,000 shows, sells 500 million tickets globally, and employs about 44,000 people. Its main three business lines are concerts, ticketing and sponsorships.
In 2020 it was basically illegal to go to live events. You don’t need a Ph.D. to realize that a company called “LiveNation” probably didn’t do so well during this time. And Live Nation’s numbers were almost as bad as they could get, but now it’s rebounding. In Q2 2022 it posted revenue of $4.4 billion, up a staggering 670% year-over-year (YoY).
One of the main ways that Live Nation forecasts its business is to look at ticket sales. According to Ticketmaster, this past June was North America’s fourth best month ever for transacted ticket volume. Live Nation is finally putting on shows and selling tickets again. And people are gobbling it up. Lots of events are selling out in record time. This despite tickets being priced 10% higher than 2019.
Looking forward into 2022 and 2023, Live Nation stated that “all leading indicators point to a roaring era for concerts and other live events”.
LiveNation’s stock is down about 20% YTD and up 155% over the past 5 years.
Roku
Ironically, No. 2 on this list of entertainment stocks to buy actually does the opposite of live events.
There’s a good chance that you’ve used a Roku before even if you didn’t realize it. Roku builds those little streaming sticks that plug into the back of your TV. The streaming sticks look and operate a little bit like an Amazon Firestick. After a quick installation, Roku gives you access to pretty much any streaming service you want. The cheapest option starts at only $29.99 so they’re very affordable.
Roku is one of the secret winners during The Streaming Wars. While everyone is going crazy arguing over which streaming platform is the most popular, Roku is quietly profiting either way. It’s a little bit like how Apple makes money regardless of which app is No. 1 in the app store.
Roku’s business is also growing incredibly quickly. Here are a few takeaways from Roku’s quarterly report on July 28:
- Total net revenue grew 18% YoY to $764 million
- Platform revenue increased 26% YoY to $673 million
- Gross profit was up 5% YoY to $355 million
Another thing to note is that there is a big shift in the advertising industry right now. Over the past few years, advertisers pulled budgets away from traditional media sources and redirected it to social media. Now, the same thing is happening with streaming. Advertisers are pulling money away from traditional TV and putting it towards streaming services, like Roku. Which may have been the tipping point Roku needed to finally become profitable.
In 2021, Roku pulled in $2.76 billion in revenue and posted a net income of $242.4 million. Roku’s total streaming hours also increased globally. This happened at the same time that regular TV viewing hours were down about the same amount.
Like I mentioned in the beginning, it feels like there will be a huge rush for people to get out into the real world again. If this happens, it might not be great for Roku in the short term. However, Roku’s business still has plenty of long-term potential. This makes it a great long-term option when looking at which entertainment stocks to buy.
Roku’s stock is down 65% YTD and up 212% over the past 5 years. If you want to go with another stock to capitalize on the streaming trend, Netflix is another good choice.
GameStop
Forget all of the short squeeze and meme-related reasons that people talk about GameStop. The main reason that all of that hype started is because lots of investors still see its potential.
Esports and gaming is a huge industry – both in the U.S. and globally. It’s estimated that there will be around 180 million monthly gamers in the U.S. this year. GameStop could position itself perfectly to make a dent in this market. GameStop is already a nationally recognized brand and has a loyal following of gamers who grew up visiting its stores. A few pivots in its core business could turn GameStop into one of the top digital entertainment stocks to buy.
One person who recognized this is Ryan Cohen, the billionaire founder of Chewy.com. Cohen bought up 12% of GameStop stock and joined its board. He has a plan to turn GameStop into the Amazon of Gaming. This plan mainly involves shifting GameStop from a retailer to an eCommerce company.
GameStop’s stock is up 3% YTD and up 644% over the past 5 years. Keep in mind though that these increases are largely due to the recent short squeeze.
Penn Entertainment
Penn Entertainment is North America’s largest gaming operator. As a gaming operator, it does a little bit of everything. It operates 43 destinations in the U.S. where people can gamble, watch horse races, eat/drink, see a show and get a room for the night. Penn Entertainment has a business model that entertains in a number of ways. This makes it one of the perfect entertainment stocks to buy for the Roaring 20s.
However, what makes Penn Entertainment a particularly great entertainment stock is that it owns the Barstool Sportsbook. In 2020, many live sporting events were either canceled or had small crowds. If you’ve watched a game in 2022 then you know that arenas have been filled to the brim.
Sports betting has always been big in the United States. The difference now is that it’s becoming a big legal market. In 2020, the sports betting market generated about $1 billion in revenue. This is during a time when sports betting is only legal in about half of U.S. states. Forbes projects that revenues could exceed $19 billion if betting gets legalized in all 50 states.
With its acquisition of Barstool Sportsbook, Penn Entertainment is in a good position to become a leader in this industry. Additionally, it also recently acquired Score Media and Gaming. This further bolsters its position in sports betting.
Keep in mind, Penn Entertainment’s stock is down 26% YTD. But it’s up 84% over the past 5 years.
Bonus Entertainment Stock: Disney (NYSE: DIS)
Of course, Disney is going to be on this list. Whether it’s theme parks, cruises, or streaming, Disney is the King of Entertainment. In fact, it might be the top entertainment stock to buy overall. The only thing is that I’ve already written quite a bit about Disney and I don’t want to shortchange you by rewriting the same points over and over. If you’re interested in reading about Disney, check out my in-depth Disney Stock Forecast here.
I hope that you’ve found this article valuable when it comes to learning a few of the best entertainment stocks to buy! As usual, all investment decisions should be based on your own due diligence and risk tolerance.
About Teddy Stavetski
Ted Stavetski is the owner of Do Not Save Money, a financial blog that encourages readers to invest money instead of saving it. He has five years of experience as a business writer and has written for companies like SoFi, StockGPT, Benzinga, and more.