Bernstein begins coverage of the U.S. entertainment sector

Analysts at Bernstein started coverage of the U.S. entertainment sector and have picked out seven stocks that they believe stand to benefit from “superfans,” who will drive growth & profitability.

“We believe that the ability to optimally attract and monetize superfans will be the key driver and differentiator of both growth and profitability in this industry. Superfans include high-earning or wealthy individuals, are less sensitive to price increases, and exhibit resilient spending habits during recessions… We believe superfan-driven growth will be sustained for years to come,” the analysts said, lead by Ian Moore.

Live Nation (NYSE:LYV) (Outperform, $185 PT, 35% upside potential): The research firm is bullish on LYV due to its powerful flywheel, which has the potential to drive meaningful outperformance across each of its operating segments. They believe that recent public and political pressure has come from a misunderstanding of the business and see the potential for multiple expansions as investor concerns ease.

“Technological improvements coupled with changes in artist and consumer behavior, especially among younger generations, enhance the inherent scarcity value of live experiences and position Ticketmaster to grow GTV ahead of expectations into the summer concert season and beyond,” the research firm said.

Spotify (NYSE:SPOT) (Outperform, $825 PT, 24% upside potential): Bernstein analysts see a strong investment case for the music streaming giant due to its proven ability to leverage its sizable market share and quality platform.

“We believe the business can exercise pricing power sustainably given recent success with minimal churn and expect regular price hikes to become a consistent ARPU driver. We expect the stock to outperform on further gross margin expansion and the launch of innovative and unique features, including a superfan subscription tie,” the research firm said.

DraftKings (NASDAQ:DKNG) (Outperform, $46 PT, 28% upside potential): Bernstein analysts noted that DraftKings’ enhanced live pricing capabilities, which are significantly boosted by the Simplebet acquisition, are the core lever toward capturing substantial growth in U.S. live betting and driving strong handle and profitability growth.

“DKNG has also demonstrated a unique ability to capitalize on event-driven engagement, which we believe should drive accelerating live bettor acquisition as streamers begin to distribute an increasing volume of live events,” the research firm said.

TKO Group (NYSE:TKO) (Outperform, $190 PT, 20% upside potential): The research firm believes TKO represents an attractive investment in live sports entertainment with a clear strategy for sustained growth. In the near term, they expect the UFC rights renewal to exceed $1B annually, and transformation at WWE to continue to drive efficiency gains and cost savings.

“We believe the core owned and operated media properties offer compelling long-term growth prospects around media rights, live events, and sponsorship, while IMG and OLE benefit from the same secular themes and provide exposure to opportunities within other rapidly growing corners of the sports ecosystem,” the analysts said.

Warner Music Group (NASDAQ:WMG) (Outperform, $32 PT, 22% upside potential): They think the company offers an attractive investment opportunity as its strong new management team executes a clear strategy toward monetizing its unique slate of IP.

“The new management team is meeting strong secular tailwinds in recording and publishing that are just beginning to deliver. Looking ahead to 2026, we see a compelling reacceleration in digital revenue, market share gains, and margin expansion,” Bernstein analysts said.

Liberty Formula One (NASDAQ:FWONA) (NASDAQ:FWONK) (Market-Perform, $105 PT, 9% upside potential): “While we do see significant opportunity for F1 to expand U.S. viewership and attendance, we expect the potential catalysts for an inflection to come in 2027 and beyond. In the meantime, we believe F1 media rights and sponsorship revenues have an attractive growth runway, which, along with the integration of MotoGP after a mid-year Dorna close, underwrites the current valuation,” the research firm said.

Flutter Entertainment (NYSE:FLUT) (Market-Perform, $275 PT, 9% upside potential): “The company laid out a compelling growth story with attractive revenue, EBITDA, and cash flow targets for 2027 at the investor day. While we believe these targets are achievable, we also believe that earnings expectations are now roughly in line. We see underappreciated upside to expectations for Brazil & Italy, but we are incrementally less optimistic around SGP penetration and UK gaming levies,” the research firm said.