3 Media Stocks to Watch From a Challenging Industry

Industry Overview - The Zacks Media Conglomerates industry is facing challenges such as declining broadcast television ratings, reduced demand for home entertainment, and advertisers' cautious spending due to inflation and high interest rates [1][2] - Despite these challenges, there is a shift towards over-the-top (OTT) content, with major players investing in original content to attract younger audiences [1][2] Trends Impacting the Industry - Original content is driving growth as media companies adapt to consumer preferences for subscription services over traditional pay-TV [3] - The demand for high-speed internet is acting as a catalyst for growth, enhancing the consumption of high-quality videos and binge-watching trends [4] - The industry is experiencing a rapid evolution with the rise of streaming services, making it difficult for traditional media companies to retain viewers [5] Industry Performance Metrics - The Zacks Media Conglomerates industry ranks 179, placing it in the bottom 28% of over 245 Zacks industries, indicating dull prospects [6][8] - The industry has underperformed the broader Zacks Consumer Discretionary sector and the S&P 500, declining 6.2% over the past year compared to the sector's growth of 2.2% and the S&P 500's rise of 8.9% [10] Valuation Insights - The industry is currently trading at a trailing 12-month price-to-sales (P/S) ratio of 1.43X, significantly lower than the S&P 500's 4.83X and the sector's 1.68X [12] Company Highlights - Pearson (PSO): Exhibited 3% underlying sales growth and 10% profit growth in 2024, with a focus on AI integration and strategic partnerships, projecting a strong outlook for 2025 [14][15][16] - Paramount Global (PARA): Transitioning to a streaming-first model, added 5.6 million subscribers in Q4 2024, with a 16% revenue growth, and expects domestic profitability in 2025 [18][19] - Reservoir Media (RSVR): Achieved 18% revenue growth in fiscal 2024, with a strong pipeline for future acquisitions, projecting revenues of $148-$152 million for fiscal 2025 [21][22]