Jefferies 'positive' on interactive entertainment despite possible recession

Funko

12/01/2023 10:14

** Looking into 2023, Jefferies has "mixed views" on the
interactive media & toy sector but is "generally positive"
despite a "potential recession looming"
    ** The broker upgrades entertainment services company
Netflix  NFLX.O  to "buy" from "hold", as ad-based video on
demand and password sharing changes will result in a lower churn
rate and a return to consistent double digit subscription growth
    ** In the music sector, which it deems a "defensive
industry", it forecasts a 4% growth rate in 2023
    ** However, the broker downgrades music streaming provider
Spotify  SPOT.N  to "hold" from "buy", saying that the
convergence of products like music, podcast, audiobooks and 
fandom "is happening, but much slower than expected"
    ** Gross margin return will not return to 2021 level until
2024, it adds
    ** The broker expects a growth rate of -2% in 2022 and -5%
in 2023 for the toy industry
    ** It upgrades toy-makers Jakks Pacific  JAKK.O  to "buy"
from "hold", pointing to strict cost control and deleveraging,
while it downgrades pop culture consumer products Funko  FNKO.O 
to "hold" from "buy"
    ** It also cuts tv streaming and advertisement platform Roku
 ROKU.O  and digital content platform Unity  U.N  to
"underperform" from "hold"
 (Reporting by Alberto Chiumento)
 ((alberto.chiumento@thomsonreuters.com))