3 Content King Stocks That Aren't Netflix

Investors looking for stocks to own within the Media space that offer compelling content and attractive returns should consider United Kingdom-based ITV, Net Ease and Time Warner, according to Nick Bertolotti of Credit Suisse.

ITV is a vertically integrated TV broadcaster that owns a series of television channels and studios in the United Kingdom and is one of the largest producers of English language drama and entertainment across Europe. The company has also been active on the M&A front by acquiring US studios and is now the largest unscripted independent production company in the US. According to Bertolotti, there are five reasons why shares of ITV could see upside: 1) as the UK economy strengthens, ad revenue should rise accordingly, 2) heavy investments within Studios will improve growth potential, 3) M&A potential is likely to be embedded into the ITV share price forward following Liberty Global increasing its ownership stake to 9.9 percent, 4) scope for the introduction of re-transmission fees in the UK from 2016, and 5) "Undemanding valuation" on an underleveraged balance sheet. Bertolotti concluded that the London-listed stock is "not expensive," trading at 14.4x P/E versus its European TV peers that trade as much as 21x. Shares are Outperform rated with a p. 290 price target.

NetEase is based in China and offers its customers online games, Internet portal, e-mail, and other wireless services businesses through its subsidiaries. According to Bertolotti, NetEase's online game business could "surprise" the Street with upside from its "resilient" PC games. In fact, games licensed from Blizzard will prove to be "drivers" for games revenue growth. Bertolotti added that NetEase's mobile games are also "promising," specifically FWJ Mobile which has maintained the number one position in China iOS' grossing ranking for the past four months. Bertolotti is projecting a 53 percent year over year growth in NetEase's third quarter revenue as mobile game developers are gaining stronger bargaining power versus game distributors. Shares are Outperform rated with a $164 price target.

Finally, Time Warner owns and operates two of the leading content producers and networks within the industry: HBO and Warner Bros. Bertolotti offered four reasons to support a bullish thesis on Time Warner: 1) the company is "structurally well-positioned" to benefit from a shift to online and other trends, 2) Turner, the group's cable networks business, can grow affiliate fees over the long-term, 3) HBO and Turner could drive top-line growth of five percent per year through 2020, 4) stripping out HBO at valuations of $30-$35 billion implies the rest of Time Warner is trading at 8.3x-10x 2016 P/E – a "significant" discount to peers. Bottom line, Time Warner's stock has "come back materially" over the past few months due to industry-wide concerns and declining advertising trends. The analyst suggested this thesis will "take many years to play out" and content owners have sufficient time to change their business models accordingly to sustain long-term growth. Shares are Outperform rated with a $100 price target.