The media industry is undergoing a remarkable transformation fueled by the digitization of content and continuous technological advancements. These factors are driving growth and compelling, significant changes within the realm of media and entertainment.
However, while Lee Enterprises, Incorporated (LEE) could be an ideal buy, fundamentally weak BuzzFeed, Inc. (BZFD) might be best avoided.
Publishers and broadcasters are embracing this evolution and actively exploring novel avenues for generating revenue, focusing on leveraging digital subscriptions and online advertisements.
As a result, the industry is projected to experience substantial expansion, with the market expected to reach an impressive $825 billion by 2023, surpassing the $717 billion mark recorded in 2019, according to a comprehensive report by PwC.
Additionally, the future looks bright for broadcast stations and networks as the revenue for ad-supported video-on-demand (AVOD), OTT, connected TV (CTV), and streaming platforms is projected to increase by 31.6% in 2023, reaching $6.8 billion.
While this figure may seem small compared to the overall broadcast and cable, which is expected to remain strong at $64-$67 billion over the next four years, the double-digit growth in digital TV and video will likely continue for years to come.
However, with the rapid rise in the cost of living, many consumers are trying to cut back on spending. The rising interest rates and elevated inflation might continue to impact the media industry this year.
Stock to Buy:
Lee Enterprises, Incorporated (LEE)
LEE provides local news and information and advertising services in the United States. The company offers print and digital editions of daily, weekly, and monthly newspapers and niche publications, and web hosting and content management services.
LEE’s trailing-12-month asset turnover ratio of 0.97x is 93.7% higher than the 0.50x industry average. Its trailing-12-month gross profit margin of 57.65% is 15.9% higher than the 49.67% industry average.
During the fiscal second quarter ended March 31, 2023, LEE’s total digital revenue increased 11.8% year-over-year to $65 billion. Its net loss decreased 19.1% year-over-year to $5.89 million. Its loss per common share decreased 19.8% year-over-year to $1.01.
LEE’s revenue is expected to come to $174.04 million for the fiscal third quarter ending June 2023. The company’s EPS for the same quarter is likely to amount to $0.93.
Shares of LEE have gained 8.1% over the past month to close the last trading session at $13.
LEE’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Stability, Value, Quality, and Sentiment. It is ranked first out of nine stocks in the B-rated Entertainment – Publishing industry.
Beyond what is stated above, we’ve also rated LEE for Growth and Momentum. Get all LEE ratings here.
Stock to Sell:
BuzzFeed, Inc. (BZFD)
BZFD is a digital media company that distributes content across owned and operated, as well as third-party platforms.
BZFD’s trailing-12-month gross profit margin of 41.78% is 16% lower than the 49.76% industry average. Its trailing-12-month Capex/Sales of 0.84% is 78.8% lower than the 3.95% industry average.
BZFD’s revenue decreased 26.7% year-over-year to $67.15 million in the fiscal first quarter that ended March 31, 2023. Its net loss came to $36.26 million. Its adjusted EBITDA decreased 20.4% year-over-year to negative $20.19 million.
BZFD’s revenue is expected to come in at $78.27 million for the fiscal second quarter ending June 2023. Its EPS is expected to come to negative $0.13. Also, it has failed to surpass EPS estimates in three of the trailing four quarters, which is disappointing.
The stock has declined 85.40% over the past year to close the last trading session at $0.64.
BZFD’s weak prospects are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system.
BZFD has an F grade for Stability and a D in Momentum and Quality. It is ranked last in the same industry.
Click here to see the additional BZFD POWR Ratings (Sentiment, Growth, and Value).
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LEE shares were trading at $12.85 per share on Tuesday morning, down $0.15 (-1.15%). Year-to-date, LEE has declined -30.77%, versus a 9.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...
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