Most entertainment stocks are considered better investments than AMC (NYSE:AMC)—well, duh! We’re talking about a stock that lost over 90% of its value last year and over 97% in the past decade. Additionally, it continues to deplete its cash reserves while grappling with a debt burden that pushes it close to bankruptcy. However, AMC is far from being an industry bellwether in 2024, with plenty of attractive picks in the entertainment sector.
It’s interesting in the entertainment sector, though, with the rapid acceleration of streaming technologies impacting consumer preferences. Moreover, streaming has proved to be a remarkably resilient space despite inflation chipping away consumers’ purchasing power. It is important, though, to separate the wheat from the chaff, making these entertainment stocks more attractive than others.
Entertainment Stocks: Netflix (NFLX)
There’s an excellent buy-the-dip opportunity in Netflix (NASDAQ:NFLX) stock at this time. Despite posting another handsome beat across both lines, streaming pioneer Netflix lost roughly 9% after earnings. The main reason for the drop is that Netflix will stop reporting subscriber numbers completely starting in the first quarter (Q1) of 2025.
I feel as though the market is overreacting to the end of subscriber reporting and ignoring the bigger picture with Netflix. It added 9.33 million subscribers in Q1, taking its tally to 269.6 million subscribers, beating Wall Street’s estimates by almost 48%. Moreover, sales were up 14.8% to $9.37 billion, while operating income shot up $2.6 billion, a 53% jump from the prior-year period. On top of that, it expects to post 13% to 15% revenue growth in fiscal year 2024, with its management plans to continue increasing operating margins.
Over the past year, the company has made notable strides through its belt-tightening measures and password-sharing crackdown. These measures have proven incredibly successful and will play a key role as Netflix sees its revenue evolving over the next few years.
TKO Group Holdings (TKO)
TKO Group Holdings (NYSE:TKO) is arguably the hottest entertainment company at this time. Surprisingly, TKO stock is outperforming the broader market, up almost 22% year-to-date (YTD) compared to the S&P 500’s 20% gain. This month, the discrepancy is more evident, where TKO is up 11% while the S&P 500’s is in the negative.
The stock has been on fire over the past few weeks following the colossal success of WWE’s WrestleMania XL event, followed by UFC 300. Both events shattered multiple records, shedding light on the incredible combo of two of the largest entertainment intellectual properties in the WWE and UFC.
The combined entity will continue to reap the rewards through its diverse revenue streams, including media rights, event ticketing, and branded merchandise. Moreover, there are also plans to venture into new markets, such as online betting, positioning it for long-term growth. I believe TKO’s media rights are still considerably undervalued and expected to increase significantly over time.
Spotify (SPOT)
Spotify (NYSE:SPOT) is another entertainment stock that blew it out of the park with its Q1 earnings print. It comfortably bested top-and-bottom-line estimates while reporting record profits. Its operational income of €168 million represented a 208% improvement from its prior loss of €156 million in Q1 2023. Moreover, its €3.64 billion sales were 20% higher than the figure it reported in the same period last year.
These stellar numbers indicate Spotify’s pervasive influence in the music streaming realm, boasting over 600 million monthly active users. Moreover, over the years, it has become a leading podcast platform, with partnerships with industry trailblazers such as Joe Rogan and investments in original content to enhance its user base. Another major factor in Spotify’s success is that it continues to implement its “efficiency” strategy, which has significantly expanded its profitability in recent quarters. That said, Spotify remains one of the best-streaming stocks in 2024.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines