Media Stocks Showing 'Stress,' But Andy Hargreaves Is Positive On These Three Stocks

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  • Andy Hargreaves, a media analyst at Pacific Crest, said in a note that he has a positive near-term view of the TV networks.
  • Hargreaves noted that his "favorite longs" remain AMC Networks Inc AMCX, Twenty-First Century Fox Inc FOXA, and Netflix, Inc. (NASDAQ: NFLX
  • Hargreaves cited favorable ad revenue distribution, sports assets, and online streaming leadership to support his three long picks..
Any Hargreaves, a media analyst at Pacific Crest, commented in a note that he has a positive near-term view of the TV networks. Specifically, the analyst singled out AMC Networks, Twenty-First Century Fox, and Netflix as being his "favorite longs."
AMC To Benefit From Ad Revenue Skew
Hargreaves continued that the distribution of ad revenue appears to be "skewing more heavily" to "top-performing content" and poses a threat to companies with "broader bases of good (but not great) content." Specifically, the analyst singled out this a positive trend for AMC Networks as The Walking Dead is "the biggest show on TV," Better Call Saul received "very good reviews," and Fear The Walkind Dead "had the highest-rated first season ever."
Netflix Was ‘Right'
Hargreaves also noted that while an ongoing theme of pushing direct distribution is "worthwhile," it merely acts as a sign that Netflix is "right" and it's already dominant position in the streaming, on-demand music segment is "likely to mute the impact" from competitors. At the same time, networks are attempting to mimic Netflix's model and their efforts are expected to be margin dilutive due to the incremental costs to build and promote content.
21st Century Fox's Sports Assets Attractive
Finally, Hargreaves stated that 21st Century Fox's sports assets should provide the company with "sustainable pricing power," that when coupled with an improved international profitability, should "drive solid profit growth."
Rating And Price Targets
Shares of AMC remain Overweight with an unchanged $85 price target. Shares of 21st Century Fox remain Overweight rated with an unchanged $35 price target. Shares of Netflix remain Overweight rated with an unchanged $140 price target.
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Posted In: Analyst ColorAnalyst RatingsAndy HargreavesBetter Call SaulCable NetworksFear The Walking DeadmediaPacific Creststreaming videoWalking Dead
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