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The bullish case for Discovery Communications Inc. (NASDAQ:DISCA) can be made for multiple reasons that are being overlooked by the Street, according to Jefferies.
The Analyst
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Jefferies' John Janedis upgraded Discovery from Hold to Buy with a price target lifted from $26 to $34.
The Thesis
The bullish case for Discovery's stock is based on four near-term encouraging trends, Janedis said in a note. These include:
- Upcoming MVPD renewals along with improvements in current deals could result could result in a distribution growth above the Street's estimates.
- The company likely realized strong upfront online ad pricing with a 7-percent increase in CPM.
- Incremental upside in cost synergies beyond the $600 million run rate target by 2020.
- Stabilization in the international business as a whole with the core Europe and South America markets showing "healthy" trends.
Given the multiple catalysts ahead, Discovery should be able to generate revenue and free cash flow growth at least equal to the group if not better over the coming few years, the analyst said. This isn't reflected in the market's sentiment, however, which values the stock today at 6.6 times estimated free cash flow/share and a $34 price target values the stock in-line with its peers despite boasting faster growth rates than some of its peers.
Price Action
Shares of Discovery Communications were trading higher by more than 4 percent Tuesday afternoon and hit a new 52-week high of $29.22.
Related Links:
Macquarie: Discovery Communications Could Be In Play As A Buyer Or A Seller
Imperial Capital: Discovery Communications Sell-Off 'Unnecessary'
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.