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The media landscape is changing rapidly, creating the opportunity for major winners and losers in the space.
On Monday, Goldman Sachs initiated coverage of six media stocks, and their coverage ranges from bullish to bearish within the group.
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The Media Analyst
Goldman analyst Brett Feldman initiated coverage on these six media stocks:
- Walt Disney Co (NYSE:DIS), Buy rating, $137 price target.
- CBS Corporation (NASDAQ:VIAC), Buy rating, $34 price target.
- Discovery Communications Inc (NASDAQ:DISCA), Neutral rating, $20 price target.
- Lions Gate Entertainment Corp. (NYSE: LGF-A), Neutral rating, $8 price target.
- Fox Corp Class A (NASDAQ:FOXA), Sell rating, $21 price target.
- AMC Networks Inc (NASDAQ:AMCX), Sell rating, $19 price target.
The Media Thesis
Feldman said cord-cutting is certainly not a new trend in traditional media, but just because legacy media companies know what they need to do to stay relevant doesn’t mean it will be easy for them to actually do it.
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“With the major media companies generating 30-90% of their revenue from linear video advertising and affiliate fees, we believe investors’ outlook for their ability to replace these revenues via direct-to-consumer (DTC) services will be a key stock driver,” Feldman wrote in the note.
He said Disney+ has clearly been an early success in the company’s pivot to a DTC model, but investors may not fully appreciate how well CBS is positioned to make the turn as well.
On the other end of the spectrum, Feldman is skeptical of Fox’s ability to transition away from a linear model, and AMC’s niche over-the-top offerings aren’t coming close to offsetting declines in linear business at this point.
Benzinga’s Take
The digital transition of the media landscape may mirror the digital transition of the retail sector in the coming years. Legacy companies like Walmart Inc (NYSE:WMT) that were willing to endure the pain of heavy investing to transform their businesses are now reaping the long-term rewards of those investments, while others like Sears and JC Penney that were slow to adapt have fallen by the wayside.
Do you agree with this take? Email feedback@benzinga.com with your thoughts.
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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.