IMAX, DreamWorks Give N.Y. Times, CBS Fits
TORONTO (TheStreet) -- New York Times (NYT) - Get Report, Cumulus Media (CMLS) - Get Report, CBS (CBS) - Get Report and other dinosaurs have been struggling as a gaggle of technology-driven competitors threaten their position as mainstay providers of entertainment and news.
Those old-line companies, which sell newspapers and run television stations, rely on advertising. They're guilty of stagnation in a rapidly evolving media marketplace.
Given their stale offerings, it would be logical to assume that the companies' shares would be at rock bottom. However, all three boast triple-digit gains in the past year, with Cumulus Media rising four-fold. Looking further back, though, reveals a downward trend that has been under way for years, which was exacerbated by the global economic crisis. Recent gains are likely only corrections from an overly aggressive pullback when advertising revenue collapsed.
Investors should look at fresher and more innovative forms of media. While some of the most interesting options such as
Pandora
and
Last.fm
are private, other companies like
DreamWorks
(DWA)
and
IMAX
(IMAX) - Get Report
are blazing a trail in new media.
IMAX was first featured as an Under the Radar pick in February. Since then, the stock has soared 51%. The company has been supercharged by the success of several smash hit movies such as
Alice in Wonderland
and DreamWorks' own
How to Train Your Dragon
.
Alice in Wonderland
has grossed $828 million worldwide, and
How to Train Your Dragon
has brought in $338 million (as of April 20).
The drive for the new and exciting is leading the push in the media world as newspapers and terrestrial radio are pushed aside for podcasts, streaming music and RSS feeds. As people's attention spans shorten, boring newspapers can't compete. In addition, the importance of mobility has made terrestrial radio's traditional forms poorly aligned with the demands of the customer. This all adds up to a bleak future for the Times, Cumulus Media and CBS.
IMAX offers customers an unmatched immersive experience through its cutting-edge technology and an impressive lineup of releases. Incredibly, the company is relatively cheap, with a PEG ratio (a measure of growth expectations) of just 0.81. Analysts expect revenue growth of 26% this year and 8% in 2011, driven by an increase in 3D releases and theater expansion, including a deal that will raise the number of IMAX screens open in China to 50 by 2012.
Print, radio and TV is getting competition on all fronts. Online streaming and DVR recorders are a thorn in the side of broadcast TV, systems like
Sirius XM Radio
(SIRI) - Get Report
and Pandora are nibbling away at terrestrial radio, and news media has shifted online. Big, entrenched news providers need to learn how to compete with a plethora of new competition, all the while suffering from slashed budgets.
Not all new-media companies are worth an investment, but consider IMAX as one of the best of the bunch. 3D is here to stay, and IMAX is just about the only game in town.
-- Reported by David MacDougall in Boston.
Prior to joining TheStreet Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level III CFA candidate.
