Morgan Stanley publishes top stocks for broader advertising and media going into 2025

Morgan Stanley has come out with its favorite picks for the broader advertising sector and also published a similar report of its top stocks in media and entertainment going into 2025.

Advertising and Marketing Services

MS said U.S. advertising is expected to grow ~6.1% in 2025, as the market faces a tough comp of a quadrennial year with both the U.S. presidential election and Summer Olympics in 2024.

The research firm, however, expects another year of strong U.S. ad spending growth led by bottom-of-funnel performance spending and has picked Meta (NASDAQ:META) and Reddit (NYSE:RDDT), which are rated “overweight,” within the internet sector subcategory.

“META is well positioned given its long pipeline of GPU-enabled products, including improvements in AI-driven feed and video recommendations, new ranking model architecture capable of learning more effectively from larger data sets and incremental diffusion model capabilities… Across the smaller ad platforms, we think RDDT continues to be well positioned to drive U.S. ad revenue growth of ~35%, 2-6x faster than competitors,” MS analysts said on Wednesday.

MS discussed the Omnicom (NYSE:OMC) + IPG (NYSE:IPG) merger, which is poised to create the world’s largest ad firm in 2025 if the deal gets cleared. They said a potential deal of this scale “would likely face some regulatory scrutiny, and execution risk could also arise given both are services businesses with human capital that may present integration challenges.”

The research firm also mentioned Roku (NASDAQ:ROKU) and reiterated its “underweight” rating. They see “an increasingly competitive” CTV advertising market, risk to medium-term platform segment gross profit expectations, and limited valuation support going into next year.

Media and Entertainment

Analysts at MS have dethroned Spotify (NYSE:SPOT) and have picked media conglomerate Disney (NYSE:DIS) as its top pick in going into the new year. Both stocks are maintained at “overweight,” but PTs were hiked.

In streaming, they expect substantial streaming profits from Disney and Warner Bros. Discovery (NASDAQ:WBD), while Paramount (NASDAQ:PARA) delivers domestic streaming profits in 2025. They noted Fox’s (NASDAQ:FOXA) Tubi is only modestly EBITDA negative, leaving only NBC’s Peacock still in the red.

“Despite the improved streaming industry outlook and general industry consolidation potential, we do not see a reason to get more bullish,” MS analysts said while referring to WBD and FOXA, which are at “equalweight”; and PARA and AMC Networks (NASDAQ:AMCX) which are “underweight.”

For U.S. theme parks, Disney (DIS) and Six Flags (NYSE:FUN) were its picks. “Disney’s Experiences scale is unmatched and offers a clear advantage as it invests in growth,” MS said.

They think Six Flags is positioned to deliver accelerating revenue growth in 2025 and beyond, driven by the improving monetization at its legacy parks, which still lags leisure-based peers in relative growth since coming out of the pandemic.

For sports assets, the research firm continued to have a bullish view, given the secular tailwinds to growth across media rights, sponsorship, and live events. It expects continued healthy growth, particularly at Liberty Formula One (NASDAQ:FWONK) and TKO Group (NYSE:TKO), with Madison Square Garden Sports (NYSE:MSGS) and Atlanta Braves (NASDAQ:BATRK) benefiting from rising team values.

On the box office front, MS said it has increased conviction in a full domestic recovery and has chosen Cinemark (NYSE:CNK). They expect higher release supply from traditional and tech studios in 2025 and 2026 to drive further box office recovery. In 2026, they expect film supply to be back to pre-COVID levels as blockbuster supply increases and small/mid-size film supply holds.

For news-related stocks, the research firm thinks the New York Times (NYSE:NYT) can see some benefits from scaling, but its slowing core news net adds raise questions on the long-term subscriber opportunity. The stock was rated “equal weight.”