MSG Networks Could Thrive In A Cord-Cutting TV Environment

Albert Fried noted the potential success of the company's pending upfront ad selling season should result in better-than-expected earnings and sales.

Although MSG generates stable revenues from Hockey TV programming, the brokerage said NY Knicks could still be a major ad and subscriber lever.

"The NY Knicks have retooled and we think if the star players stay healthy The Knicks have a core that can play competitive basketball. A competitive Knicks Team should drive the TV Advertising and subscribers just at a time (in our view) when some MVPDs seem to open to including the Regional Sports in Skinny Bundles," analyst Rich Tullo wrote in a note.

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In FY2017, Tullo expects MSG to benefit from an escalation in TV affiliate fees, which in a modest cord cutting environment offset lower MVPD Subs. Further, the company has significant revenue upside from upfront and scatter market advertising.

"We like the scatter market opportunity better that the upfront opportunity as MSG can package sponsorships where the benefit is less to the MSGN shareholder," Tullo noted.

In addition, the company's additional topline drivers include OTT, digital downloads and live streaming. Currently, MSG is operating at minimum MVPD guaranties representing fewer than 8 million subscribers.

"We think the addressable market for MSG is 14 to 21 million households based on housing data from NJ, NY, CT and PA. We argue, new technologies create an opportunity to unlock addressable subs provided MSGN can obtain the media rights from the various sports leagues," Tullo added.

Tullo expects 2017 EPS of $2.28 on revenue of $697.69 million.

At time of writing, shares of MSG fell 1.09 percent to $17.29.

Full ratings data available on Benzinga Pro.