Hot Picks: AppLovin, Take-Two and Netflix stand out in entertainment

Artificial intelligence, digital advertising and recurring revenue models are creating new growth opportunities across the entertainment sector, even as the industry undergoes a broader period of adjustment and consolidation.

BNN Bloomberg spoke with Alicia Reese, senior vice-president of equity research at Wedbush, about opportunities in mobile advertising, video game publishing and streaming, as well as the role M&A continues to play across the sector.

Key Takeaways

• The entertainment industry remains in a period of adjustment, with investors focused on pockets of fundamental growth and ongoing consolidation activity.
• AI-driven advertising platforms continue to gain traction as companies expand beyond gaming into consumer advertising and connected TV markets.
• Recurring revenue streams, including subscriptions, online services and mobile offerings, are becoming increasingly important drivers of growth for gaming companies.
• Streaming platforms are benefiting from advertising growth, improving profitability and strong content pipelines heading into the second half of the year.
• M&A remains a key theme across entertainment, although leading platforms may remain selective and pursue deals only when valuations and strategic fit align.

Read the full transcript below:

LINDSAY: It’s time now for Hot Picks. Today we are tuning into three options in the entertainment sector. For more, let’s welcome Alicia Reese, senior vice-president of equity research at Wedbush. Good morning. Thanks for joining us.

ALICIA: Thanks for having me.

LINDSAY: Before we get into your top picks, let’s take a broader look at the sector in general. Is this industry still in growth mode, or is it in a period of adjustment at the moment?

ALICIA: Yeah, it’s in somewhat of a period of adjustment here. There are certainly pockets of growth, and it’s certainly a good market for M&A and for consolidation overall. It’s certainly a more favourable market than we’ve seen for a while, so that’s certainly been a theme. What we’re looking at is trying to find those pockets of real fundamental growth.

LINDSAY: Okay, so let’s talk about that then. When it comes to pockets of real fundamental growth, I guess we’ll get into your Hot Picks. AppLovin is your first one. Tell us about this company and why you like it.

ALICIA: Sure. AppLovin, they’re compounding at over 80 per cent EBITDA margins, about 60 per cent revenue growth. Their AI flywheel is simply dominant in mobile gaming. The real story is what’s next, though. Consumer advertising is accelerating, the self-serve launches this month, and then early connected TV work pairing World Supply and eXact targeting, we think, could unlock a third massive TAM. Our $640 price target implies still over 20% upside from here, and that’s not really including any of that massive connected TV yet.

LINDSAY: You mentioned off the top that M&A is a really big component within this industry right now. Are you seeing that at all with AppLovin?

ALICIA: AppLovin’s not really an acquirer so much. I mean, they have acquired some businesses in the past, but not necessarily to take over the whole business and fold it in. They usually take over the technology and maybe some key hires within that. They run an extremely lean operation, and they intend to keep it that way, and that’s one of the reasons why they can see 80 per cent-plus EBITDA margins.

LINDSAY: What are some of the risks facing AppLovin, given that, as you say, they run extremely lean like that?

ALICIA: Yeah, I wouldn’t say they’re really high risk with the lean operation. They hire very carefully and very well, and they have really strong retention. I would say also the ad ramp cannibalizing gaming is the nearest-term concern, but I do think management has really addressed this well. Gaming continues to grow well above their 20 to 30 per cent long-term target range, and there hasn’t been any real cannibalization up to this point. So I think lean organization, huge growth opportunities and significantly more to come as they move into connected TV over the next year or so.

LINDSAY: Your next one is Take-Two Interactive. Tell us why you like this one. What opportunities are you seeing there?

ALICIA: Yeah, I’d say at just 23 times consensus fiscal 2028 EPS, the market isn’t pricing in the scale of GTA VI. It’s not pricing in the recurring revenue transformation. Most notably, Take-Two traded at 20 to 25 times before Red Dead Redemption 2, but GTA Online, GTA+ subscriptions and mobile now make this a far more durable business than we’ve seen in the past, and I think that warrants a premium to prior cycles. It’s not a one-hit wonder, and it’s not going to be a boom-and-bust company like it used to be. GTA VI is on track for Nov. 19. There’s no more slippage here, and I think the guidance that management most recently set is a floor, not really where it can hit. It’s beaten significantly, by over 30 per cent-plus in prior cycles. I’d say our $300 price target, being 30 per cent above where shares are trading today, gives us a good entry opportunity ahead of that.

LINDSAY: And again, with Take-Two, any headwinds?

ALICIA: Not necessarily. I don’t think there’s real risk of GTA VI slipping. I think the narrative could just stick to the big game and not the recurring revenue model, so it’s more perception than reality that could get in the way for shares.

LINDSAY: Got it. Okay, your next pick is one I think a lot of viewers will be more familiar with, and that is Netflix. You say Netflix continues to expand its content offerings. So what is it that you like about Netflix moving forward?

ALICIA: Well, it’s down 27 per cent since our last report in April post-earnings, and that’s despite expanding operating margins and $12.5 billion in free cash flow guidance, which I think they can beat. Advertising revenue is on track to at least double to $3 billion in 2026. The second-half setup is stronger than the first half, and I think there was some disappointment in the first half and a lot of M&A chatter that’s gotten in the way of shares. But content amortization peaks in Q2, and management’s guidance explicitly held for the full year, which implies the back half is going to be really strong. We think there’s a lot of runway left in the advertising opportunity, and that’s not priced into shares. There’s 50 per cent upside to our price target from current levels, and I think all the chatter right now creates a really good opportunity to get back into the shares.

LINDSAY: You mentioned the M&A activity that’s been going on with Netflix. I think we all know about it withdrawing its bid for Warner Bros. earlier this year. There are also reports that Netflix lost out to Fox in its pursuit of Roku. So I’m wondering, in terms of M&A activity moving forward for Netflix, is there anything that you see in the works? Do they need to do this, or are they strong enough as an independent company?

ALICIA: Perfect question. Netflix does not need M&A to win; they’re already winning. I do think it’s a nice-to-have if they were to get some sort of historic studio, where they would not have to pay perpetual licensing fees. But we know now that Netflix is willing to walk away when the price isn’t right, and I think that’s really important. I don’t know that I would characterize Netflix not getting Roku as losing out to Fox so much as not being willing to agree to the terms or not seeing it as a necessary bet for the company. They want to spend less on content overall, and that’s a really good win. Roku is great for a smaller streaming presence like Fox, and not necessarily one that already gets so much traffic. Netflix is the No. 1 streaming app on any platform, so it doesn’t have to own the platform to maintain that huge advantage. I think it was the stock-to-cash ratio that Roku wanted for the deal that Fox was able to offer and Netflix probably wasn’t.

LINDSAY: Okay, we’re going to have to leave it there. Alicia Reese, senior vice-president of equity research at Wedbush, really appreciate your time. Thanks for joining us.

ALICIA: Thank you so much.

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This BNN Bloomberg summary and transcript of the June 17, 2026 interview with Alicia Reese are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.