We recently compiled a list of the 10 Best Entertainment Stocks To Buy According to Analysts. In this article, we are going to take a look at where Sphere Entertainment Co. (NYSE:SPHR) stands against the other best entertainment stocks to buy according to analysts.
According to a report by The Business Research Company, the international entertainment and media industry was valued at $2.51 trillion in 2023. It is expected to grow at a compound annual growth rate (CAGR) of 7% to reach $3.55 trillion by 2028. Growth in the entertainment industry is driven by the rapid adoption of subscription models, the evolution of live events, and the use of augmented and virtual reality technologies.
A report published by FTI Delta earlier this year highlighted some significant trends and challenges in the media and entertainment industry. As per the report, the live entertainment sector has experienced a robust recovery, with global spending on live music in 2023 increasing by 49% compared to 2019. Major sports leagues, including the NFL, NBA, MLS, NHL, and IndyCar, have not only recovered but surpassed pre-pandemic attendance levels. The post-pandemic recovery within the industry has not been uniform. For instance, the filmed entertainment industry faced severe challenges in late 2023 due to strikes by the Writers Guild of America (WGA) and SAG-AFTRA. These disruptions led to a more than 70% decline in production and marketing expenditures, compounding existing issues from early 2023 when studios were already tightening budgets. As a result, spending in 2023 was down approximately 35% from 2022, reflecting a struggling market. The report anticipates recovery for filmed entertainment post-strike to be more subdued than previous rebounds, with projections of about 25% year-over-year growth in 2024.
On the bright side, the report highlighted a significant growth trajectory for United States TV and connected TV (CTV) advertising, emphasizing the transformative impact of CTV on the advertising landscape. The combined US TV and CTV ad spending is projected to approach $100 billion by 2027, with CTV being the primary driver of this growth. In 2024 alone, CTV advertising is expected to increase by $5.5 billion, representing a 22% year-over-year growth. The surge in CTV advertising is largely attributed to the rise of premium ad-supported streaming services.
In addition to a robust performance expected within the advertising segment, the gaming sector remains resilient. The video game industry achieved a CAGR of 9.2% from 2019 to 2022. Despite a 6.3% decline from the peak surge during the COVID-19 pandemic, console sales in 2022 remained 18% higher than pre-pandemic levels, indicating strong ongoing demand for gaming hardware. As per the report, the overall outlook for the video game market remains positive, with expectations of above mid-single-digit growth throughout the next year.
Is Sphere Entertainment Co. (NYSE:SPHR) The Best Entertainment Stocks To Buy According to Analysts?
A diverse and enthusiastic live audience attending a sold out WWE event.
To compile the list of the 10 best entertainment stocks to buy according to analysts, we used the Finviz stock screener and our previous articles. Using these two sources we aggregated an initial list of entertainment stocks sorted by their market capitalization. Next, we checked analysts’ upside potential for each stock and shortlisted stocks with an analyst upside potential of at least 25%. Lastly, we ranked our stocks in ascending order of the analysts’ upside potential. We have also added the number of hedge funds holding each stock sourced from Insider Monkey’s Q3 2024 database. Please note that the data was collected on December 13, 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Analysts’ Upside Potential: 28.27%
Number of Hedge Funds: NA
Sphere Entertainment Co. (NYSE:SPHR) is a company focused on live entertainment and media, primarily operating in two main areas Sphere and MSG Networks. Sphere is a cutting-edge entertainment venue that uses advanced technology to create immersive experiences for audiences. The company opened its first Sphere venue in Las Vegas in September 2023. On the other hand, MSG Networks operates two regional sports networks, MSG Network and MSG Sportsnet, along with a streaming service called MSG+.
Sphere Entertainment Co. (NYSE:SPHR) is actively pursuing a global expansion strategy for its innovative entertainment venues. In October 2024, management announced plans to build its second venue in Abu Dhabi, following the successful launch of the first Sphere in Las Vegas. This new venue is expected to match the scale of the Las Vegas Sphere, accommodating around 20,000 guests.
The company reported a year-over-year revenue increase of $109.9 million to reach $227.9 million in its first fiscal quarter of 2025. The revenue growth was driven by strong consumer demand for events and original productions like VU2 and Postcards from Earth. However, the company also faced operating losses, indicating that while revenues are rising, expenses are significant as well. Management has been working on expanding its library of experiential content and on new productions set to debut in 2025. It aims to host diverse events simultaneously, enhancing its operational model to maximize revenue while improving guest experiences.
To achieve this management has begun forming partnerships with major corporations for events and sponsorships, such as collaborations with Hewlett-Packard and Delta Airlines. These partnerships are expected to enhance marketing efforts and broaden Sphere’s reach. It is one of the best entertainment stocks to buy according to analysts.
Ariel Fund stated the following regarding Sphere Entertainment Co. (NYSE:SPHR) in its Q2 2024 investor letter:
“By comparison, shares of live entertainment, media and technology company, Sphere Entertainment Co. (NYSE:SPHR) traded down on mixed earnings results, giving back some of its strong first quarter gains. Although residency demand is robust and the venues’ original content experience and Exosphere remain popular, some investors expect near-term utilization will slow due to Las Vegas seasonality. Meanwhile, international expansion remains the company’s priority, with management suggesting a major announcement soon. Although we believe it will take time for Sphere to reach its full potential, the company is well on its way to having events 365 days a year. It is ramping up the scale of its concert residencies, securing marquee sporting and corporate events, and creating more original content for The Sphere Experience. In our view, the new experiential immersive venue in Las Vegas and its potential franchise opportunities alongside the company’s two regional sports and entertainment networks present a long-term opportunity that remains meaningfully underappreciated at current trading levels.”
Overall, SPHR ranks 9th on our list of best entertainment stocks to buy according to analysts. While we acknowledge the potential of SPHR to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SPHR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
