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Merger-Mania Could Depress Big Media Stocks: Analyst

By | Wednesday July 23, 2014 @ 8:23am PDT

Merger-Mania Could Depress Big Media Stocks: AnalystCowen and Co’s Doug Creutz advises investors today to “call a ‘time out’” on Big Media stocks in a break with the prevailing view on Wall Street that an upcoming round of mergers could help companies, or at least not hurt them. He fears that Fox’s bid for Time Warner will lead to “a land grab for content assets.” And companies that need cash for acquisitions probably won’t continue to repurchase shares and pay big dividends — strategies that have helped to keep investors interested in traditional media. The analyst says he now takes a ”more negative view” of Big Media, and downgraded Fox (to underperform from outperform), Viacom, and Time Warner (both to market perform from outperform). “Historically, this group has been uninvestable when M&A activity has been significant.”

Creutz observes that when Fox CEO Rupert Murdoch has had dealmaking on his mind “the shares of his company have underperformed the market.” And the analyst says he’s “not a believer that a combination with Time Warner would create significant value.”

It’s too risky to bet on traditional media, Creutz says, especially at a time when their stock prices are “near multi-year highs.” The advertising slow down in Q2 “feels like it was a little worse” than previous soft patches. It could become “a more significant negative” if the economy weakens. The pay TV cash cow could be threatened as “new over the top [Internet] distribution appears to be opening the door for insurgent content providers to potentially take market share.” And Creutz notes that the “dismal” … Read More »

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Business Briefs: DreamWorks Animation Stock Downgrade; Aereo Strategy Questions; Cable Nets Rocky Forecast

By | Monday July 14, 2014 @ 10:18am PDT

Business Briefs: DreamWorks Animation Stock Downgrade; Aereo Strategy Questions; Cable Nets Rocky ForecastDreamWorks Animation Shares Touch 52-Week Low

The stock is down about 1% in early afternoon trading after taking a hit early this morning following B. Riley’s Eric Wold’s decision to abandon his “buy” recommendation. It touched $21.90, a 12-month low, after the analyst dropped his price target nearly 22% to $25. Wold acknowledged that his upgrade in March, when the stock value was 23% higher, “proved to be ill-timed and premature.” He calls the box office for How To Train Your Dragon 2 “disappointing” which “may turn DWA into a ‘show me’ stock and keep a ceiling on valuations until more consistent box office results develop.” The good news? Wold still likes DWA’s plans to diversify and expand its TV production. He also says that Dragon shouldn’t require a write-down.

Aereo’s Effort To Define Itself As A Cable Company Could Backfire At FCC: Analyst

Aereo may have bought some time with its attempt to redefine itself as a cable company, but it likely won’t succeed, Guggenheim Securities’ Paul Gallant says this morning. He figures that U.S. District Court Judge Amy Nathan — who’s overseeing broadcasters’ plea for an injunction to shutter the streaming service — will want to hear additional arguments after the U.S. Supreme Court recently ruled that Aereo could not take over-the-air signals without payment. Justices likened it to a cable company: Copyright law gives operators the right to a compulsory license, which enables them to carry broadcast signals if they pay a relatively low fee set by the Copyright Office. But if the FCC also deems Aereo to be a … Read More »

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Media Stocks Join In Wall Street’s Fireworks Market

Media Stocks Join In Wall Street’s Fireworks MarketThe bull market that began in 2009 continued its stampede today in abbreviated trading ahead of Independence Day: The Dow Jones Industrial Average increased 0.5% and crossed 17,000 for the first time following a strong June jobs report that showed the unemployment rate dropping to 6.1%, its lowest point since late 2008. Media companies joined in the rally. The Dow Jones U.S. Media Index, up 0.7%, hit an all time high. So did Disney (+0.5%), Time Warner Cable (+0.7%), Charter (+0.3%), and Nielsen (+0.6%), while Time Warner (+0.7%) and Gannett (0.7%) touched 52-week highs.

Fox (+1.4%) led the Big Media pack followed by Discovery (+0.8%), Time Warner, Disney, Viacom (+0.2%), Comcast (+0.6%), and CBS (no change) while Sony dropped 0.5%. Read More »

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Overseas Appeal Of Sequels, Superheros And Animation Should Boost Big Media Stocks: Analyst

By | Wednesday July 2, 2014 @ 9:08am PDT

Overseas Appeal Of Sequels, Superheros And Animation Should Boost Big Media Stocks: AnalystBad news for those of you who are sick of Hollywood’s flood of sequels, superheros, and animated films. Nomura analyst Anthony DiClemente says we’re going to see a lot more of them — and that’s a good thing for studios. He raised his stock forecasts for Disney, Fox, and Time Warner this morning, arguing that their efforts to appeal to overseas audiences should enable them to profit as international box office receipts grow an average of 5.5% a year to $57.6B in 2022.

Disney, Fox, and Time Warner have “increasingly shifted film production towards genres that resonate well within these markets,” he says. Sequels accounted for 76 of the 107 top grossing films in the 10 largest markets over the last 12 years. The hot genres also tend to be the most profitable: The average animated film from 2004 to 2013 generated a gross margin of 52%, followed by action with 40% — well ahead of drama at 30% and comedy at 22%.
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Media Stocks Beat Overall Market In Q2 As Charter Leads And WWE Lags

By | Monday June 30, 2014 @ 2:06pm PDT

Media Stocks Beat Overall Market In Q2 As Charter Leads And WWE LagsMedia investors did OK in Q2, as long as they diversified — or were lucky. The quarter ended today with the industry, as measured by the Dow Jones U.S. Media Index, up 6.5% from the end of March. That gave investors a slight edge over those who stuck with the Standard & Poors 500, which was up 4.7%. Big Media companies were evenly split above and below the benchmarks, but mostly just making up for their Q1 gains or losses. Fox led the pack this quarter with shares +9.9% (up from a 9.1% drop in Q1) followed by Time Warner (+7.5% vs -6.3% in Q1), Comcast (+7.3% vs -3.7%), and Disney (+7.1% vs +4.8%). They handily beat Viacom (+2.0% vs -2.7%), CBS (+0.6% vs -3.0%), Discovery (-10.2% vs -8.5%) and Sony (-12.3% vs +10.6%).

More broadly, Charter takes the prize as the top performing media company on our watch list with shares +28.6%, reversing a 9.9% drop in Q1. Investors warmed to the company after it cut a deal with Comcast to acquire and swap subscribers, virtually guaranteeing that Charter will become the No. 2 cable operator if the industry giant buys Time Warner Cable. Others up at least 20% in the quarter include Sinclair Broadcast Group (+28.3%, vs -24.2% in Q1), Netflix (+25.2%,vs -4.4%), Cinemark (+21.9%, vs -13%), and Apple (+21.2%, vs -4.3%).

But WWE, the media leader in early 2014, hit the mat as the Street soured on the company’s new online streaming channel that seems to compete with traditional TV. … Read More »

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