The COVID-19 pandemic adversely affected entertainment companies last year, particularly movie theaters, production studios, and live entertainment organizations. entertainment houses remained closed for several months due to social distancing mandates and other restrictions. Consequently, global theatrical revenue declined 71.6% year-over-year to $12 billion in 2020. Also, theatrical entertainment accounted for only 15% of the total global entertainment revenue, compared to 43% in 2019.

While the industry has attracted record foot traffic over the past few months, the resurgence of COVID-19 cases is threatening the progress the industry has made this year. Entertainment companies are concerned about a decline in foot traffic in the coming months. The pandemic has also accelerated the shift toward digital entertainment, which is expected to affect the demand for in-person entertainment companies for an extended period.

Thus, we think it is better for now to avoid the stocks of Live Nation Entertainment, Inc. (LYV), AMC Entertainment Holdings, Inc. (AMC), Madison Square Garden Sports Corp. (MSGS), and Six Flags Entertainment Corporation (SIX).

Live Nation Entertainment, Inc. (LYV)

LYV is a Beverly Hills, Calif.-based live entertainment company. Its  businesses consist of the promotion of live events, including ticketing, sponsorship, and advertising.

LYV’s operating loss declined 78.4% year-over-year to $127.29 million in its fiscal second quarter, ended June 30. Its net loss and net loss per share stood at $195.67 million and $0.90, respectively. For the six months ended June 30, its revenues declined 39.8% year-over-year to $866.56 million.

A $4.89 billion consensus revenue estimate for the current year represents  a 162.7% increase year-over-year. However, the company’s EPS is expected to remain negative at least in the current year.

LYV stock price has declined  9.8% over the past six months to close yesterday’s trading session at $79.50. The stock has slumped 5.4% over the past five days.

LYV has a D grade for Value and Stability in our proprietary POWR Ratings system. POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. Among the 14 stocks in the F-rated Entertainment – Sports & Theme Parks industry, LYV is ranked #6.

Click here to view additional LYV ratings for Growth, Momentum, Sentiment, and Quality.

AMC Entertainment Holdings, Inc. (AMC)

AMC, through its subsidiaries, is involved in the theatrical exhibition business. It licenses first-run films from distributors owned by film production companies and independent distributors on a film-by-film and theatre-by-theatre basis. It is headquartered in Leawood, Kans.

On July 19, AMC announced its agreement to reopen The Grove Theater and The Americana at Brand Theater in the Los Angeles area. However, rising COVID-19 cases pose a threat to the operationality of the theater, owing to the potential for a re-introduction of pandemic  restrictions.

Most of AMC’s theater operations were suspended for the first two months of the second quarter due to the pandemic and did not reopen until early June. This lag is observable in its recent quarterly financials. Its operating cost and expenses increased 51.1% from their  year-ago value to $741.3 million in its  fiscal second quarter, ended June 30. AMC’s net loss and net loss per share came in at $343.60 million and $0.71, respectively.

Analysts expect the company’s EPS to remain negative at least until the next year. Furthermore,  the company missed the Street’s EPS estimates in each of the trailing four quarters. AMC has slumped 7.5% in price intraday to close yesterday’s trading session at $33.82.

It is no surprise that AMC has an overall D rating, which equates to Sell in our proprietary rating system. AMC has an F grade for Stability and Value, and D for Quality and Sentiment. It is ranked #6 among the eight stocks in the F-rated Entertainment – Movies/Studios industry.

Beyond what we’ve stated above, we have also rated AMC for Momentum and Growth. Click here to view all AMC ratings.

Madison Square Garden Sports Corp. (MSGS)

New York City’s MSGS operates as a professional sports company. Its portfolio of assets includes the New York Knickerbockers of the National Basketball Association (NBA) and the New York Rangers of the National Hockey League, two development league teams, an esports franchise,  esports teams, and a few others.

Results for its fiscal year, ended June 30, reflect the impact of the COVID-19 pandemic, including government-mandated assembly restrictions at The Garden and the shortened 2020-21 NBA and NHL regular seasons. For its fiscal year 2021, the company generated $415.72 million in revenues, representing  a 31.1% decline  year-over-year. In addition, its operating loss decreased 16.4% from its year-ago value to $78.44 million.

The Street expects MSGS’ revenues to decrease 10.8% year-over-year to $50.88 million in the current quarter, ending September 30, 2021. The negative $1.22 consensus EPS estimate for the current  quarter indicates a 9.1% decline year-over-year. Shares of MSGS have lost 17.7% in price over the past six months and 14.2% year-to-date.

MSGS has an overall D rating, which translates  to Sell in our POWR Ratings system. In addition,  the stock has a D grade for Value and Stability. To see more of MSGS’ component grades, click here.

MSGS is ranked #8 in the Entertainment – Sports & Theme Parks industry.

Six Flags Entertainment Corporation (SIX)

SIX owns and operates regional themes and waterparks under the Six Flags name. Its parks offer thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues, and retail outlets. SIX is based in Grand Prairie, Tex.

In July, a lawsuit was filed against SIX alleging that Six Flags Hurricane Harbor in Texas had failed to notify hundreds of park-goers about a chemical leak into a kiddie pool area, which has caused dozens of visitors to be treated at hospitals for skin irritations, headaches, and respiratory issues. This development is expected to hurt visitors’ confidence.

The company reported lower attendance for the second quarter of 2021, versus the same period in 2019, due to the pandemic’s continuing effects. Attendance was 19% lower than in the second quarter of 2019. For its fiscal second quarter, ended July 4, SIX’s net income increased 151.5% year-over-year to $70.52 million. However, its cash and cash equivalents declined 14.6% from its  year-ago value to $252.89 million in the six months ended July 4. Shares of SIX have shed 10% in price over the past five days and 1.7% intraday to close yesterday’s trading session at $38.03.

The stock has a D grade for Value and Stability in our proprietary POWR Ratings system. In addition, SIX is ranked #3 in the Entertainment – Sports & Theme Parks industry.

To see additional SIX ratings for Growth, Sentiment, Quality, and Momentum, click here.

LYV shares were unchanged in after-hours trading Friday. Year-to-date, LYV has gained 9.15%, versus a 19.36% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...

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