GMBL - Favorable Fundamental Outlook; Moderating Stock Expectations
Overview: A promising fundamental outlook. Looking back on 2021, it was a disappointing year. The advertising recovery was strong, but did not exceed 2019 levels. As we look forward toward 2022, most media executives anticipate a recovery to 2019 levels or higher. We believe that the media stocks will climb the wall of worry in 2022. Stock valuations do not appear to be extended and the fundamental environment appears favorable. As such, we remain constructive on selective media stocks for 2022 but do not expect the same stock performance as in 2021.Digital Media: Will there be a turnaround in stock performance? Many stocks in the Internet & Digital Media were “Covid beneficiaries” with increased time spent at home viewing on-demand video content or playing video games. As consumers began to resume their normal lives in 2021, the Covid beneficiaries began to face difficult comparisons.Esports & IGaming: A victim of earlier success? The average increase for stocks in this sector in 2020 was 117%. But the Noble Esports and IGaming index, which was up 25% through mid-March, finished the year down a similar amount (-29%), reflecting a nearly halving of stock prices in the last 3 quarters of the year, another sector that fell victim to pandemic-related investor enthusiasm. We look for a better performance in 2022.Television: Will it be a Gray year? The TV stocks started the year nicely, but the performance faded in the second half of the year. This market cap weighted index was heavily influenced by the weak performance of the shares of Viacom and Sinclair Broadcasting. Even the strong 145% gain in the shares of Entravision did not help the index. But, the underperformance of Gray Television (up a moderate 12%) stands out and we question if 2022 could be its year.Radio: Several stocks get an "A" for performance in 2021. There were some extraordinary stock performances. Salem Media, increased an extraordinary 194% and led the list of the strongest performer in 2021. In addition, the shares of Townsquare Media increased 100%. We believe that investors should set expectations for moderating stock performances in 2022. Read More >>