Positives and Negatives For Time, According to Morgan Stanley

Time Inc. TIME has been under fire for being an old world media play since shares began trading on Monday. Morgan Stanley initiated coverage on Time at equal-weight and put a $26 price target (14.4 percent upside) on the stock.

Analyst Toni Kaplan began by laying out key positive and negative catalysts on the stock. Positives include well known brands, potential for free cash flow generation, greater focus on margin specialization, product growth and industry consolidation.

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On the other hand, key concerns include: the magazine sector in decline, increasing traffic for internet media, high leverage could be damaging in times of economic downturn and declining sales (which Kaplan expects to be flat post 2017).

Kaplan describes the $26 price target, “We value TIME through a DCF, which we check against multiple analysis. We derive our $26 price target from our DCF model, which assumes a 0.75% terminal growth rate (given our view of muted long-term growth) and 9.8% WACC (which includes a high peer average beta of 1.53, as well as a high market risk premium of 6.25% due to competition/industry secular decline) in our base case.”

Shares of Time are down 3.07 percent to $22.74 since the IPO earlier this week.