What's going on?
On Wednesday, a number of European media companies reported weak results, which hurt most of the sector’s stocks. Even Axel Springer, the German publishing giant, saw its stock sell off despite its numbers actually being in-line with investors’ expectations.
What does this mean?
Axel Springer (publisher of newspapers such as “Bild” and “Die Welt”) grew its revenue, which largely consisted of its digital businesses (67%). That’s not bad at all for a “traditional” media company (albeit one that has recently moved heavily into digital media) and should have been a reason for the Germans to pop bottles. But since Italian broadcaster Mediaset and French advertising company JCDecaux reported worse than expected results, investors started worrying about Europe’s media sector in general – and all those stocks declined.
Why should I care?
For the stock: If you can’t beat them, buy them. While competitors like Mediaset are under pressure from “new media” companies (in this case Netflix), Axel Springer has been on an online shopping spree. The German company has been aggressively investing in US startups focused on digital natives, such as financial news site Business Insider (which it ultimately bought) and men’s lifestyle site Thrillist. And even though that strategy is apparently starting to pay off (at least judging by their numbers), the markets don’t seem to agree (yet).
For you personally: If you’re the only one who’s done their homework, you might still get punished. Investors often don’t just look at a single company but at sectors as a whole. And if the market loses confidence in a sector (i.e. it thinks that there’s less money to be earned in “traditional” media), a company, which is doing quite well, can still get punished. It’s something to bear in mind if you’re investing in individual stocks.