Legacy media is booming
Stocks for traditional media networks are hitting record highs, thanks in large part to streaming.
Why it matters: The COVID-19 crisis has taken a toll on the pay-TV industry, but investors feel optimistic that traditional content companies have value in launching their own streaming services, or producing content for others.
The big picture: Companies like ViacomCBS and Discovery that were once showing little or modest signs of growth have hit new highs on Wall Street.
- ViacomCBS stock has been one of the fastest-growing stocks this year, gaining roughly 146% since Jan. 1. Its stock was plateauing since it started trading on the Nasdaq as a combined company on Dec. 5, 2019. It has experienced big gains since launching its new streaming service Paramount+ in early March.
- Discovery's stock has grown 156% since it launched its streaming service Discovery+ last December. Prior to its streaming foray, its stock price was also plateauing.
Be smart: Investors in legacy media companies may also be showing some signs of optimism in response to theaters beginning to reopen.
- Lionsgate, ViacomCBS, Disney and other companies that rely on theater revenue are rallying in response to reports that movie theaters and parks are beginning to open across the country.
Yes, but: Most stocks have experienced unprecedented growth during this crisis, and the gains aren't expected to last forever.
- Of note, shares in ViacomCBS and Discovery fell Wednesday in response to analyst downgrades after months-long rallies that have carried both companies' stocks to unprecedented highs.
What to watch: There's no question that for now, streaming is so buzzy that Wall Street is willing to reward any company investing in direct-to-consumer services. In time, it will be interesting to see whether investor optimism remains despite the fact that many of these services aren't profitable yet.