Time Warner Still A Buy 'As Earnings Growth Accelerates,' JPMorgan Says

In a report published Tuesday, JPMorgan analyst Alexia S. Quadrani reiterated an Overweight rating on

, while raising the price target from $91 to $96. The analyst believes that the stock does not fully reflect the expectations of accelerating EPS growth and therefore presents an attractive entry point. "We project TWX will grow earnings by a high teens EPS CAGR over the next several years, including 22 percent in 2016, as it benefits from accelerating affiliate revenue growth following a reset of its major renewals, as well as increasing monetization at HBO (both sub growth and distributor terms)," Quadrani stated. The analyst believes that announcements regarding Time Warner signing the remaining two affiliate deals among the top five distributors, along with robust Q2 results could be potential near-term catalysts for the stock. According to the JPMorgan, "Current expectations look for muted growth in Q2 due to 1) difficult comps on the prior year Amazon deal, 2) weaker profits at Warner Bros. due to the release of several big films in the quarter with front end loaded P&A, and 3) four fewer NBA playoff games vs. last year. However, ongoing healthy ad trends, box office upside from San Andreas, and some early success around the HBO Now launch can offset some of these challenges in our view, suggesting possible upside to current expectations." The analyst also expressed optimism regarding the company successfully renewing the two remaining deals, set to expire in 2015, which would then drive acceleration in affiliate revenue growth in the double digits in the beginning of 2016.