Will the MGM acquisition let Amazon's share price roar?
Amazon's [AMZN] share price fell 1.6% between the start of 2021 and 1 June, when it closed at $3,218.65. Despite a downturn in March that saw its share price sink to $2,951.95, the stock recovered swiftly.
June 4, 2021

This article was originally published on Opto - Invest in the Next Big Idea.

Amazon's share price saw rapid gains through April, peaking at $3,554.00 on 30 April. However, its share price fell 11.3% over the following fortnight to close at $3,151.94 on 12 May, as investors began losing faith in tech stocks across global markets. Over the past 12 months (to 1 June), Amazon's share price has gained 30.1%.

Now, the e-commerce giant has bolstered its streaming offering with the recent acquisition of famed film studio MGM Holdings. Will the news make Amazon's share price one to watch?

Amazon in the Bond market

Last week, reports emerged that Amazon had agreed to purchase Hollywood studio MGM in a deal worth $8.45bn including debt, with an equity value of $6.5bn. The deal will be the second-largest acquisition in Amazon's history, after the $13.7bn it paid for Whole Foods four years ago.

As part of the deal, Amazon will acquire MGM's back catalogue of intellectual property totalling over 4,000 films, including the James Bond and Rocky franchises. The move will strengthen Amazon's Prime Video platform as it continues to compete with fellow streaming giants like Netflix [NTFLX] and Disney [DIS].

The streaming wars have intensified of late, with Disney announcing in March that its Disney+ streaming platform had reached over 100 million subscribers less than two years after its launch. Netflix, in comparison, took 10 years to reach that milestone. Disney+ was forecast in March to overtake Prime Video's subscriber numbers by 2024.

Intellectual property is the ammunition with which the streaming wars are waged. Increasing competition means that studios' proprietary services, such as WarnerMedia's HBO Max, are increasingly protective over legacy content such as the Friends series. Amazon has so far trailed on this metric. In the US in 2020, 12.5% of movies and 21% of TV was exclusive to the platform, compared to more Netflix's 48.6% and 72.3% respectively, according to Statista.

By bringing MGM's extensive library under Amazon's wing, the deal will immediately boost the proprietary content Prime Video is able to offer as well as providing scope for some of the studio's major titles to be developed.

Jeff Bezos, CEO of Amazon, said on a briefing call with shareholders on 26 May that "MGM has a vast, deep catalogue of much-beloved intellectual property, and with the talented people at MGM and the talented people at Amazon Studios, we can reimagine and develop that IP for the 21st century."

However, in the case of James Bond, Amazon may be blocked from excessive tinkering, particularly in the TV series direction, as the franchise is part-owned by Eon Productions. Its owners, Barbara Broccoli and Michael G Wilson, exercise close control over the character and clarified Bond's ongoing primary role as a film character following news of the acquisition.

Media exposure

The announcement saw Amazon's share price increase 0.18% on 26 May, but this was followed by two consecutive days of price falls on 27 and 28 May. From 25 May to 28 May close, Amazon's share price fell 1.10%.

The media streaming industry seems to have performed better over the period, with both the iShares Evolved US Media and Entertainment ETF [IEME] and the John Hancock Multifactor Media and Communications ETF [JHCS] showing gains on 26 and 27 May, before tailing off on 28 May.

Both funds count Netflix and Disney among their top 10 holdings, with Disney topping the iShares Evolved US Media and Entertainment ETF's holdings list at 5.09% of the fund, as of 28 May. The fund 1.2% between 25 and 1 June, while the John Hancock Multifactor Media and Communications ETF has gained 1%. The funds are up 11.6% and 9.6% so far this year, respectively.

However, because its streaming service is currently a side-line to its primary business activities, Amazon isn't featured on these media ETFs. Instead, the stock can be found in the holdings of the ProShares Online Retail ETF [ONLN] or the Amplify Online Retail ETF [IBUY]. As of 1 June, Amazon is the top holding in the former, with a 23.46% weighting, while it lies 35th in the latter's holdings, weighted at 1.69%.

Given its massive position in the stock, the ProShares Online Retail ETF's performance mirrors Amazon's closely: it is down 1% in the year to date but up 60.6% in the past 12 months. With its much lower Amazon weighting, the Amplify Online Retail ETF has gained 5.4% year to date and 85.9% in the past 12 months.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Top Ten Stocks To Buy Now
Commit to your future wealth today and join 1000s of subscribers receiving:
  • New stock picked every week out of 60,000 worldwide
  • Ten Foundational stocks to hold until 2034
  • A library of 60 stocks with analysis
  • 10 year Track record of performance
By submitting your email address, you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Policy and Terms of Use.

The Home of Successful Investing.

© 2024 MyWallSt Ltd. All rights reserved.







This website is operated by MyWallSt Ltd (“MyWallSt”). MyWallSt is a publisher and a technology platform, not a registered broker-dealer or registered investment adviser, and does not provide investment advice. All information provided by MyWallSt Limited is of a general nature for information and education purposes, and you should not construe any such information as investment advice. MyWallSt Limited does not take your specific needs, investment objectives or financial situation into consideration, and any investments mentioned may not be suitable for you. You should always carry out your own independent verification of facts and data before making any investment decisions, as we cannot guarantee the accuracy or completeness of any information we publish and any opinions that we publish may be wrong and may change at any time without notice. If you are unsure of any investment decision you should seek a professional financial advisor. MyWallSt Limited is not a registered investment adviser and we do not provide regulated investment advice or recommendations. MyWallSt Limited is not regulated by the Central Bank of Ireland. MyWallSt Limited may provide hyperlinks to web sites operated by third parties. Your use of third party web sites and content, including without limitation, your use of any information, data, advertising, products, or other materials on or available through such web sites, is at your own risk and is subject to the third parties' terms of use.