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Wednesday, Jul 6, 2022

Public Companies’ New Mark: $671 Billion

The collective market capitalization of locally based publicly traded companies rebounded over the last 12 months, thanks in large part to huge newcomer Snap Inc. and a few star performers led by Activision Blizzard Inc.

Snap’s initial public offering in March added nearly $21 billion in market capitalization to the L.A. area’s public company roster as of June 30, though the Venice tech firm’s value has slipped substantially since then. Santa Monica video game developer Activision added another $14 billion.

These gains brought the total market cap of the 144 public companies on the LABJ Stock Index to $671 billion as of June 30, up $76 billion from last year, marking a return to growth in L.A. area public company values after two years of cumulative drops.

Activision, led by Chief Executive Robert Kotick, stood out as the biggest gainer in dollar terms among established companies. Its market cap rose 48 percent for the 12 months ending June 30, closing then at $43.4 billion, and pushing Activision up to the No. 3 spot this year from No. 4 last year on the Business Journal’s list of largest public companies. (See page 14.)

“Activision bought a large mobile game maker (King Digital, the maker of ‘Candy Crush’) and crushed it on its own with new games like ‘Destiny’ and ‘Overwatch’ supplementing perennial hits like ‘Call of Duty’ and ‘World of Warcraft,’” Michael Pachter, an analyst with the San Francisco office of L.A.-based Wedbush Securities, said in an email.

Activision’s growth and the addition of Snap at No. 6 offset some prominent departures from the list, including Jacobs Engineering Group Inc., which decamped from Pasadena to Dallas, and DreamWorks Animation SKG Inc., which was acquired by NBCUniversal. The Activision and Snap developments also made up for an overall 13 percent market cap growth rate among existing companies on the list that trailed market averages.

Disney still No. 1

Walt Disney Co. remains by far the largest public company on the list – which is based on our LABJ Stock Index (see page 28) – with a market cap of $166 billion, or roughly one-fourth the cumulative market cap for all of the companies on the list.

Burbank-based Disney’s market cap grew 5 percent over the past 12 months, perhaps held somewhat in check by continued weakness in its ESPN network, where consumers moving away from traditional cable television led to a slowdown in growth.

“Disney’s media networks business … has experienced slower growth due to cord cutting,” said Paul Sweeney, media analyst with Bloomberg Intelligence.

Sweeney said Disney’s revenue growth was driven mainly by its movie studio business – led by billion-dollar hits “Star Wars: Rogue One” and “Finding Dory” – and its theme park division. The $5.5 billion Disney Shanghai Resort opened last year and drew 11 million visitors in its first full year of operation, far exceeding company projections.

No. 2 Amgen Inc. of Thousand Oaks recorded an 11 percent growth in market cap to $126.7 billion, thanks to strong sales of recently approved drugs and cost-cutting measures on the manufacturing side, according to a March research report from Karen Anderson, an analyst in the Chicago office of Morningstar Equity Research. Amgen has also invested heavily in the “biosimilar” market, producing drugs similar to ones already on the market, she said in the report.

Glendale-based Public Storage Co. dropped one spot in the opposite direction to No. 4 as its market cap fell $8 billion, or 18 percent, to $36 billion, making it the biggest decliner in market cap in terms of dollar value.

“The drop in Public Storage’s share price was due primarily to concerns over slowing rental rate/occupancy growth and a new supply pipeline that continues to grow,” said Jonathan Hughes, real estate analyst with Raymond James of St. Petersburg, Fla. “This is not isolated to Public Storage; the other self-storage REITs have all sold off as well.”

No. 5 Rosemead-based Edison International was virtually unchanged in market cap for the 12-month period ending June 30, at $25.4 billion.

Snap back

Snap’s nearly $21 billion in market cap as of June 30 put it at No. 6. That dollar amount was a long drop from the $33 billion market cap the company reached on March 3 one day after its initial public offering.

Shares of the app developer soon began to ebb as analysts quickly warned that the elevated share price wasn’t justified by the performance of a company that had yet to turn a profit and was facing intense competition.

The stock started falling and continued its long slow slide below its initial day closing price of $24 a share. Morgan Stanley equity analyst Brian Nowak earlier this month issued a downgrade report, saying Snap’s ad products were taking longer to develop and that the number of users downloading the company’s apps was falling. Nowak set his new price target at $16 a share, way down from his initial $28 a share. That sent Snap’s stock price and market cap tumbling even more; as of July 18, the market cap stood at $17.4 billion.

Other big movers

Two other large cap public companies also saw their market caps fall over the past 12 months: Macerich Co., which fell to No. 10 from No. 6 as its market cap tumbled 32 percent to $8.2 billion; and Mattel Inc., which fell to No. 15 from No. 7 as its market cap slid 30 percent to $7.4 billion.

Santa Monica-based mall owner Macerich got hammered by the weakness and turmoil in the retail sector as shoppers turned away from brick-and-mortar stores to online purchases.

“The market has come to the full realization that traditional brick and mortar retail is at significant risk from e-commerce and competition from newer and better retailers, especially in the fast fashion industry,” KiBin Kim, analyst with SunTrust Robinson Humphries of New York, said in an email. “Macerich in particular had a more noticeable decline in stock price because it was an M&A candidate, so the stock price was already unusually high.”

El Segundo-based toy maker Mattel’s problems have been mostly internal, according to Linda Bolton Weiser, an analyst with D.A. Davidson & Co. in Great Falls, Mont.

“They haven’t executed well,” Weiser said. “They did not effectively market for the last Christmas season, and many of the products they couldn’t sell then had to be sold at a deep discount after the holidays.”

Mattel also has cycled through three chief executives in the last three years, most recently in February hiring Google executive Margaret Georgiadis to try to right the ship, Weiser said.

A big gainer was Santa Monica pharmaceutical company Kite Pharma Inc. which had a banner 12 months as its market cap more than doubled to $5.8 billion, causing it to leap to the No. 20 slot from No. 35 last year.

Raymond James analyst Reni Benjamin said in an email that Kite reported positive results from an immunotherapy drug, putting the drug on track for U.S. Food and Drug Administration approval toward the end of this year.

Howard Fine
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

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