1 Entertainment Stock to Sell and 1 to Buy in 2022

The entertainment industry has seen a fluke during the COVID-19 pandemic due to a significant surge in demand for digital entertainment. It offered many people the opportunity to entertain themselves and stay active from the comfort of their own homes. The integration of advanced technologies such as 5G, Artificial Intelligence (AR), Virtual Reality (VR) and Metaverse is likely to fuel growth in the entertainment space.

As content creation and consumption comes with the paradigm shift Rise of the MetaverseThe entertainment industry is expected to reach $29.35 billion in global revenue by 2022, with growth of c 8.5% CAGR to a projected volume of $40.74 billion by 2026.

In addition, the entertainment industry in the United States is expected to reach $7.44 billion in 2022 and $10.01 billion by 2026, a growth rate of a CAGR of 7.7%.

However, investors should invest in entertainment stocks with caution. It would be wise to consider fundamentally weak entertainment stock Unity Software Inc. (u) and buy Electronic Arts Inc. (EA) in order to make optimal use of the momentum in the industry.

Stock for sale:

Unity Software Inc. (u)

U acts as a platform to create and run three-dimensional content in real time. The Company’s platform has two segments: Build Solutions and Operate Solutions. Offerings include Unity Ads and Unity IAP (in-app purchases) to help users monetize content, Multiplay for hosting multiplayer games, and Vivox to enable player-to-player communication.

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On September 12, 2022, it was announced that AppLoving Corp (APP) scrapped its plans to acquire U after the latter opposed its $17.5 billion bid. This deal could have brought together two leading providers of mobile developer tools.

For the fiscal second quarter (ended June 30, 2022), U’s non-GAAP operating loss increased 6351% year over year to $44.13 million. As a result, the company’s non-GAAP net loss was $53.14 million, down 3862.5% from the same quarter last year. U’s quarterly non-GAAP net loss per share deteriorated 1700% year over year to $0.18.

Analysts expect U’s loss per share to increase 150% year over year to $0.15 for the fiscal third quarter ended September 2022. The company’s loss for the current fiscal year is also expected to worsen, down 95.7% year-on-year to $0.43.

The stock is down 23.3% over the past month and 73.4% year-to-date to close the last trading session at $36.86.

Consistent with these bleak prospects, U has a total of one POWR ratings from D, resulting in a sale in our proprietary rating system. The POWR ratings are calculated considering 118 different factors, with each factor being optimally weighted.

The stock is rated D for stability and value. It is ranked #21 in #22 stock Entertainment – Toys & Video Games Industry.

In addition to the above, we also rated U for Growth, Momentum, Sentiment, and Quality. To view all POWR ratings for U, click here.

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Stock to buy:

Electronic Arts Inc. (EA)

EA is an interactive digital entertainment company that develops, markets, publishes and distributes games, content and services for gaming consoles, PCs, mobile phones and tablets worldwide.

On September 12, 2022, EA announced a new partnership with KOEI TECMO and studio Omega Force to develop and publish the next excellent hunting game. This new breed of game is expected to expand the company’s reach in global markets.

On September 9th, EA announced Seattle-based Ridgeline Games as the newest studio dedicated to the Battlefield franchise. Ridgeline Games will focus on developing a narrative campaign set on the battlefield Universe. This cooperation should create added value and make the franchise more attractive.

For the first quarter of fiscal 2023 ended June 30, 2022, EA’s net revenue increased 13.9% year over year to $1.77 billion. The company’s operating income rose 37% year over year to $441 million for the same period. Quarterly net income increased 52.4% year over year to $311 million for EPS of $1.11, up 56.3% year over year.

Analysts expect EAs revenue and eps for fiscal year 2023 (ended March 2023), up 6.3% and 2.3% year-on-year to $7.99 billion and $7.18, respectively. The company’s revenue and earnings per share are expected to rise 7% and 11.2% year over year next year to $8.55 billion and $7.98, respectively. The company also beat consensus EPS estimates in each of the last five fiscal years.

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The stock is up 0.9% on the day to close the last trading session at $122.93.

EA’s solid fundamentals and bright outlook are reflected in its POWR ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. It also has a B grade for quality and value. It ranks #5 out of 22 stocks in the entertainment, toys, and video games industry.

In addition to the ratings above, we also rated EA for growth, momentum, stability, and sentiment. click here to access all ratings for EA.

EA shares were flat in after-hours trading on Tuesday. Year-to-date, EA is down -8.23% versus a -18.53% gain in the benchmark S&P 500 over the same period.

About the author: Santanu Roy

Fascinated by the traditional and evolving factors that influence investment decisions, Santanu decided to pursue a career as an investment analyst. Before moving to investment research, he was a process associate at Cognizant. With a master’s degree in business administration and a fundamental approach to analyzing companies, he aims to help individual investors identify the best long-term investment opportunities. More…

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