2 Media Stocks to Buy Hand Over Fist in June

Content is still king, even if the market thinks it’s the jester these days.

Media stocks aren’t getting a lot of love these days. A transition away from the legacy media cash cow to the financially challenging realm of digital delivery has cooled investor interest in the industry. However, don’t dismiss the chances for the kings of content to script a happy ending for their shareholders.

Walt Disney (DIS -0.16%) and Comcast (CMCSA 1.33%) are a pair of leading entertainment stocks that could be strong plays when the recovery occurs in media companies. They’re both juggernauts, generating $89 billion and $121 billion, respectively, in trailing revenue.

1. Disney

Disney shares are sliding for the third consecutive month, with the media giant’s stock about to break below $100 for the first time in nearly five months. It’s a sharp reversal for the stock that was this year’s best performer among the Dow 30 components just a few weeks ago.

There are some good reasons to consider Disney now as it trades near a five-month low. Let’s start with valuation.

The company is historically cheap now after years of bloat following acquisitions, streaming losses, and a lack of cost controls. Disney expects to shave more than $7.5 billion in annual expenses by the end of this fiscal year, a move that finds its stock trading at a fiscal 2025 earnings multiple in the high teens. It’s been several years since Disney was that cheap.

Folks at home watching a football score celebration on TV.

Image source: Getty Images.

There are also some catalysts that are specific to June. Inside Out 2 hits movie theaters next week, and it’s highly likely to be Disney’s biggest theatrical release in more than a year. After a rough 2023 at the box office — and an intentionally slow start to 2024 — Disney has more than a half-dozen potential blockbusters coming to the silver screen in the next seven months.

It’s not just about mastering the multiplex. Disney+ and the rest of the company’s direct-to-consumer platforms should collectively turn profitable by the end of the year.

This isn’t the finish line. It’s the new starting line.

Disney has said that year-over-year comparisons at its theme parks — particularly Disney World in Florida — may be challenging in the near term, but it has a lot of new experiences, including the repurposing of its popular log flume ride opening later this month. Even its traditional media networks business can get a boost if advertisers feel the economy is stable enough to ramp up their marketing budgets.

2. Comcast

Shares of Comcast have fallen 30% over the past three years, but that’s actually better than most of its peers. Disney is down 42% in that time, for example. Comcast operates in the same thorny markets as Disney with its NBC Universal media networks, Peacock streaming service, and Universal Studios theme parks, but the stabilizing force has been its connectivity.

As a leader in home internet, its steady broadband business has helped offset the cord-cutting carnage at its cable TV operations, as well as its networks. The well-rounded offerings make Comcast a strong all-weather play. Many of the folks kissing Comcast goodbye as a cable TV operator will still pay up for upgraded broadband as streaming usage explodes in popularity.

The company’s Universal Studios also has a couple of big movies rolling out this summer. Despicable Me 4 and Twisters are sequels to popular franchises that will hit a multiplex near you next month. It’s also turning heads with theme-park enthusiasts as Epic Universe gears up to open in Orlando next year. It’s the most highly anticipated theme park to open in this country on this side of the millennium.

Comcast is trading for just 10 times its trailing earnings, and its dividend is yielding a healthy 3.1%. If you think that media stocks are toast, any shakeout in the weaker names will only make Disney and Comcast stronger. The weather is starting to heat up in June, and it wouldn’t be a surprise to see both companies’ shares start to follow suit.

Rick Munarriz has positions in Comcast and Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.

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