Reconstructing the Discovery Channel The Oprah Winfrey Way, A Barron's Analysis

In a report, Barron's finds that the fascinating "real world" programs of Discovery Channel (NASDAQ: DISCA) is pushing its revenues up by a hundred percent, and share prices stand at 31 this year. The future looks good with Discovery's low-cost, high-margin programing model that includes a Oprah Winfrey Network set to launch on Discovery in early 2011, and a rebranding of the Discovery Kids Channel with a tie up with Hasbro.

Discovery has other internationally popular shows like the Discovery Channel (aimed at armchair adventurers), TLC (for women and homebodies) and Animal Planet (for animal lovers) where the basic idea is to tap into the evergreen human fascination for extraordinary things in the animal world - including us humans.

The company predicted strong fourth-quarter results and boosted its outlook for the full-year 2009. Presently, revenue stands at $3.45 billion to $3.5 billion and operating income, before depreciation and amortization, of $1.43 billion to $1.46 billion.

According to Christopher Marangi, media analyst at Gabelli & Co, "Pound for pound, it's probably got the best media assets in the business." Marangi projected a 2010 Ebitda (earnings before interest, taxes, depreciation and amortization) of $1.27 billion for Discovery; it has been trading around 10.5 times that value. That is a lot for a media company; Walt Disney (NYSE: DIS), Time Warner (NYSE: TWX) and Viacom (NYSE: VIA) fetch lower multiples, as do cable and satellite outfits.

Barron's Bottom Line:

Discovery has doubled its shares this year, but it can push up to another 25% or more within a year, with its strong results and shining outlook.

But CEO David Zaslav's biggest coup is the OWN: or the Oprah Winfrey Network, which he launched with Oprah Winfrey. This is billed as the network of self-discovery and connections and an extension of her existing show, which will stop broadcasting next year. If all goes alone, this alone can boost up Discovery to record heights.