Deutsche Bank Thinks Big Media Growth Will Continue Despite Ratings Drop

Growth at big media companies will continue as revenue from affiliates increases and international markets expand, an analyst said Thursday.

Deutsche Bank's Brian Kraft launched coverage on a raft of media companies and made the growth prediction despite his forecast of flat advertising revenue and lower ratings and subscriber numbers.

Kraft initiated Buy ratings on Twenty-First Century Fox Inc FOXA, Time Warner Inc TWX and Viacom Inc. VIAB.

The analyst issued more cautious Hold ratings on CBS Corporation CBS, Walt Disney Co DIS Liberty Media Corp LMCA and Sirius XM Holdings Inc SIRI.

Kraft offered a $42 target on Fox and said its three-year prospects for profit growth are the best in the sector.

Fox's outlook is driven by agreement renewals with domestic affiliates and by international growth. Its shares are down about 3 percent in the past year, and were nearly unchanged recently at $34.96.

Time Warner got a $100 target from Kraft, who said its growth rate is just behind that of Fox, while most of its revenue derive from contractual affiliate fees rather than from the more risky advertising business.

Shares of Time Warner are up 22 percent in the past year and were little changed recently at $83.65.

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Viacom, down about 20 percent since last year, traded recently at $70.43, off $0.36.

Kraft put an $83 target on Viacom and said its "discounted value" is attractive despite the company's ratings erosion. Moreover, investors worries over contract renewals with distributors are "over done," in Kraft's view.

"Most distributors that have dropped Viacom are smaller operators," Kraft said.

CBS got a target of $67; The shares changed hands recently at $62.01, down $0.44, and are off 8 percent in the past year.

Kraft said CBS is "well positioned" but its stock has little potential for price appreciation.

Disney, changing hands recently at $105.16, is up 27 percent since March 2014 and Kraft put a price target of $105 on the company.

"It's been a top performer but the stock is slightly ahead of itself," Kraft said of Disney.

Liberty Media, down more than 70 percent in the past year, changed hands recently at $39.48 and Kraft put a $43 target on the company.

Kraft said the potential 7 percent upside for Liberty stock is "too limited."

Kraft also put a $4 target on Sirius, Liberty's largest holding. Sirius changed hands recently at $3.92.