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Exploring An Upgrade On Discovery Communications, Questions Remain

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Exploring An Upgrade On Discovery Communications, Questions Remain
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Credit Suisse upgraded shares of Discovery Communications Inc. (NASDAQ: DISCA) (NASDAQ: DISCB), premised on its view that the near-term outlook is solid. The stock was lifted from Underperform to Neutral, with a price target lowered from $23 to $22.

Analysts Omar Sheikh, Lawrence Dann-Fenwick and Boyao Sun attributed the upgrade to upbeat management commentary on third quarter advertising and international affiliate trends, increased confidence that the Scripps Networks Interactive, Inc. (NASDAQ: SNI) transaction can generate revenue synergies as well as cost savings, especially outside of the United States.

Additionally, the analysts noted that Discovery Communications stock has pulled back steeply.

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Credit Suisse pointed to the positive third quarter data points highlighted by management in investor meetings, with solid third quarter U.S. advertising trends, low-double digit growth in scatter pricing and higher ratings at TLC and ID.

Although viewing the deteriorating subscriber trends in the U.S. as a long-term concern, Credit Suisse believes the emergence of non-sports "Entertainment-only" packs will serve to mitigate the decline over the next 12-18 months.

"Q3 international affiliate revenues will be supported by "very healthy" uptake of the Eurosport player app with Bundesliga content in Germany since the start of the new soccer season; and by new distribution deals signed with Amazon.com, Inc. (NASDAQ: AMZN) in the UK and Germany for Eurosport/Discovery," the firm said.

Credit Suisse raised its 2017 earnings per share estimate from $2.21 to $2.26, but lowered its 2018 estimate from $2.51 to $2.47.

Latest Ratings for DISCA

DateFirmActionFromTo
Apr 2018Wells FargoUpgradesMarket PerformOutperform
Mar 2018BarclaysUpgradesUnderweightEqual-Weight
Feb 2018Moffett NathansonUpgradesSellNeutral

View More Analyst Ratings for DISCA
View the Latest Analyst Ratings

Posted-In: Boyao Sun Credit Suisse Lawrence Dann-Fenwick Omar SheikhAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

 

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