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Stock Roundup: Loop Capital Markets Assesses The Media, Entertainment Space

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Stock Roundup: Loop Capital Markets Assesses The Media, Entertainment Space
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Loop Capital initiated coverage of seven names within the media and entertainment space this week.

The Analyst

Loop Capital Markets' Alan Gould initiated coverage of the following companies:

  • News Corp (NASDAQ: NWSA) with a Hold and $17 price target.
  • Viacom, Inc. (NASDAQ: VIAB) with a Hold and $33 price target.
  • Walt Disney Co (NYSE: DIS) with a Buy and $130 price target.
  • CBS Corporation (NYSE: CBS) with a Buy and $75 price target.
  • Time Warner Inc (NYSE: TWX) with a Buy and $107.50 price target.
  • Lions Gate Entertainment Corporation Class A Voting Shares (NYSE: LGF.A) with a Buy and $36 price target.
  • Twenty-First Century Fox Inc (NASDAQ: FOXA) with a Buy and $43 price target.

News Corp

  • News Corp's stock has benefited from a "nice run" and remains positioned for growth, Gould said. 
  • The perception of News Corp as a "declining newspaper company" is inaccurate, as news and information only accounts for 16 percent of its value, the analyst said. 
  • News and information revenue and EBITDA have fallen by one-third and two-third, respectively, over the past six years.
  • EBITDA declines are likely to continue moving forward, but at a more moderate 6-percent rate, according to Loop Capital Markets.

Viacom

  • Viacom's new management has succeeded in stabilizing the company and repairing broken distributor relationships, Gould said. 
  • The company is a leader in advanced digital advertising after the launch of Viacom Vantage in 2015, he said. 
  • Viacom is projected to see revenue growth in the third quarter in its media networks, according to Loop. 
  • The stock "appears inexpensive" at 8.2x projected earnings and 7.3x EBITDA, but the company still faces multiple macro trend headwinds and a lack of a "must-have" networks in its portfolio, Gould said. 

Disney

  • Disney's proposed acquisition of Fox's media and entertainment assets positions the company to be a "more competitive player" in streaming, Gould said. 
  • Disney continues to "dwarf the competition" in film profits, and Loop projects this trend will continue.
  • Disney's theme parks continue to offer strong returns on assets, and the company plans on opening four "lands" and three cruise ships in the coming years, according to Loop. 
  • Disney is led by a strong management team and backed up by compelling content and a global scale, Gould said. 

CBS

  • CBS boasts the greatest exposure to retrans/reverse comp revenue that can grow from $1.3 billion in 2017 to $2.5 billion by 2020, according to Loop's projections. 
  • The namesake CBS network is the most-watched TV network, and the company's Showtime property is a premium a la carte network.
  • CBS has "enough" sports programming to compete with peers, Gould said. 
  • CBS' stock is trading at a 40-percent discount to the S&P 500 index, but boasts a 15-percent projected five-year EPS compounded annual growth rate profile, the analyst said. 

Related Link: Viacom, CBS Are Better Off Apart, Says Rosenblatt Securities

Time Warner

  • Time Warner's tie-up with AT&T is likely to pass, and shareholders will receive $107.50 per share, which implies a 12-percent return, Gould said. 
  • If the deal is rejected, the company will likely authorize a $7-billion share buyback program, he said. 
  • Time Warner and its properties, especially HBO, will be "relatively immune" to the cord-cutting trend, in Loop Capital's view. 
  • Time Warner's stock is trading at 12.4x 2018 EPS estimate, which is a discount to its five-year average multiple of 16.3x on forward earnings.

Lions Gate

  • Lionsgate operates in a "sweet spot" within the media industry and is also unlikely to be impacted by cord-cutting trends, Gould said. 
  • The company has minimal exposure to the advertising declines within the whole media landscape, he said. 
  • Lionsgate's acquisition of Starz will prove to be accretive and improves the predictability of its earnings and cash flow, according to Loop. 
  • The analyst's $36 price target is based on a 10-percent discount to Lionsgate's valuation of $40 per share if it were a private company.

Twenty-First Century Fox

  • The majority of Twenty-First Century Fox's assets will be acquired by Disney, but Comcast might also present a competing bid, Gould said. 
  • The remaining news business is a "must-have" channel, even for cord-cutters, as its key channels are on all of the new over-the-top streaming platforms, the analyst said. 
  • The "New Fox" will continue being one of the six most important traditional TV networks that hold "ultimate negotiation power" with distributors and consumers, he said. 
  • The "New Fox" also deserves a higher multiple than the average cable network, as Fox News Network will account for 70 percent of total EBITDA, according to Loop. 

Related Link:

Fox News Benefiting Most From Trump-Inspired Bump In Prime-Time News Ratings

Latest Ratings for CBS

DateFirmActionFromTo
Oct 2018Morgan StanleyReinstatesEqual-Weight
Sep 2018UBSDowngradesBuyNeutral
Aug 2018ArgusDowngradesBuyHold

View More Analyst Ratings for CBS
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