Is DHX Media Ltd. (TSX:DHX.B) a Buy Today?

DHX Media Ltd. (TSX:DHX.B)(NASDAQ:DHXM) does not look like a great buy after its fiscal 2019 second-quarter results.

Lady holding remote control pointed towards a TV

Image source: Getty Images.

DHX Media (TSX:DHX.B)(NASDAQ:DHXM) stock climbed 1.79% on February 20. The stock is down 26.2% over the past three months. Shares dipped after the release of its fiscal 2019 second-quarter results but have since rebounded.

Back in the spring of 2018, I’d discussed DHX Media and another struggling media stock, Corus Entertainment. DHX Media suffered steady declines into late 2018 until hitting a six-year low of $1.09 in September. How should investors approach the stock today?

The company released its Q2 fiscal 2019 results on February 12. DHX Media reported total revenue of $117 million compared to $121.9 million in the prior year. Adjusted EBITDA fell to $22 million compared to $32 million in Q2 fiscal 2018. DHX Media reported a net loss of $17.9 million, or $0.13 per share, compared to net income of $7.4 million, or $0.06 per share, in the prior year.

In October, I’d discussed a new strategy that DHX Media had laid out. Like other legacy media companies, DHX Media has struggled to gain ground in a rapidly changing environment. On September 24 the company concluded a strategic review. The board of directors suspended its quarterly dividend and revealed that this would free up $10 million to invest in its WildBrain business.

WildBrain is a children’s entertainment content creator with a presence on streaming platforms like Amazon Video Direct and YouTube. In the second quarter of fiscal 2019, WildBrain grew views 29% to more than seven billion. Its revenue increased 13% to $19.9 million, which pushed its first-half revenue up 27% to $36.2 million. WildBrain expanded its reach in the quarter to other ad-supported video-on-demand platforms like Apple TV, Amazon Fire, and Roku.

In the quarter, DHX Media revealed that its strategic shift was not complete. It announced it would reorganize the company into two subsidiaries to bolster strategic flexibility. One will focus on cash flow-generating studios and TV channels, and the other will focus on global digital and content assets with “significant growth potential.” This includes WildBrain.

DHX Media stock had a Relative Strength Index (RSI) of 42 as of close on February 20. This put shares firmly in neutral territory as of this writing. The stock has not benefited from the broad rally on the TSX, but media stocks in general have seemingly continued poor trends from 2018.

Is DHX Media a buy today?

The positive results at WildBrain are encouraging, but it remains to be seen whether it can provide revenues to be a real difference maker going forward. The Peanuts acquisition will provide a boon in the coming quarters. In Q2 2019, the company reported a 7% increase in consumer products revenue on the back of the Peanuts acquisition. It remains a formidable brand.

Value investors missed their shot in September 2018. DHX Media is simply not worth taking a risk on in early February, especially with so many hot options still available on the TSX.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. David Gardner owns shares of Amazon and Apple. The Motley Fool owns shares of Amazon and Apple and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple.

More on Investing

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »