Picket lines on Hollywood Boulevard are spurring buying on Wall Street as investors turn toward stocks that promise to fill the entertainment gap threatened by an extended writers and actors strike from scripted work.
The Sportico Sports Stock Index rallied more than 5% in July, well ahead of the rise in the broad market, thanks to strength in content platforms with live sports exposure, sports fantasy and gambling stocks and most publicly traded sports and live entertainment owners. The benchmark sports index closed July at 1,286, up more than 22% year-to-date, as sports shares also benefit from an improving economic outlook powering stocks overall.
With the Writers Guild of America strike entering its fourth month, the appearance of a drawn-out strike means no new scripted shows are being produced, written or even pitched to producers. “The endgame is to allow things to drag on until union members start losing their apartments and losing their houses,” a studio executive told Sportico sister publication Deadline. That makes sports, already valued for their ability to get people to watch events live or close to live, appear even more valuable—after all, MLB and MLS are still playing, and the other major leagues will gear up as usual in the coming weeks.
Leading the sports stock index higher in July is Fubo (FUBO), which gained 62% in the month to close at $3.37 a share, a 10-month high. “Sports is going to have more viewership,” because of the Hollywood labor trouble, said Needham & Co. equity analyst Laura Martin, in a phone call. “There is going to be more disconnect from linear TV, because the only thing on it now is sports because all the guilds are on strike. That benefits Fubo because it is heavily focused on sports, and you can turn it off at any time.”
A streaming platform, Fubo emphasizes its sports programming in its pitches to potential subscribers, who aren’t locked into any long-term contracts. Fubo has enjoyed better retention of subscribers after the end of the fall-winter sports than expected, in part because of its decision to carry the Diamond Sports RSNs this year.
Other broadcasters posted solid gains in July as well. In particular, Nexstar (NXST) added 12% to its stock price stemming from positive reaction to the CW securing the rights to NASCAR’s Xfinity series for $900 million. Nexstar owns 75% of the CW, and it’s also the largest TV station owner in the U.S. and the largest affiliate of Fox and CBS. Nexstar is also the No. 2 affiliate of NBC (it’s ABC’s third), whose parent, Comcast (CMCSA) gained 10% in July, thanks to better-than-expected gains in its Peacock streaming service and not-as-bad-as-feared losses in its broadband Internet subscribers. Fubo, Nexstar and Comcast were three of 15 sports stocks that gained 10% or more in the month. Other notable gainers were Genius Sports (GENI, up 27%), DraftKings (DKNG, up 20%) and Madison Square Garden Sports (MSGS, up 14%), which rallied sharply Thursday when it was announced the Knicks and Rangers parent will be added to the S&P Small Cap 600 index. Addition to a major index means ETFs and mutual funds that track the index need to buy its shares.
Of the 40 stocks in the Sportico index, 25 posted gains and 15 losses in the month. Most losses were mild but not for Churchill Downs (CHDN). It suffered a 17% decline as racing continues to be suspended at its eponymous Kentucky track after 12 horses died there this spring. The company announced Monday it will resume racing in September. Churchill Downs shares also were weighed down by negative sentiment on profitability and casino volumes at some locations despite record top-line results for its fiscal year, announced last week. The company outperformed expectations on revenue, posting $1.806 billion in sales, but missed on earnings, reporting a loss of $5.71 a share, according to S&P Global Market Intelligence.
Manchester United (MANU) was the second-worst performer among sports stocks in the month, slipping 9% as lack of clarity on the potential sale of the team continues to weigh on sentiment.
The Sportico Sports Stock Index debuted in August 2020 as the first stock market barometer of the sports business. Starting at 1,000, the index has now risen more than 28%, excluding additional gains resulting from dividends paid by component stocks. To be included in the index, a company must have a significant reliance on sports for its growth, be traded in the U.S. at a sufficient volume and have a market capitalization of $50 million or greater.
