Baird Upgrades Netflix, Downgrades AT&T, Comcast As Pandemic Shifts Media Market

The downturn in live sports — although temporary — along with growing consumer economic pressures could accelerate video cord-cutting, adversely impacting AT&T Inc. T and Comcast Corporation CMCSA, while Netflix Inc NFLX may be a beneficiary, according to Baird.

The Netflix, Comcast, AT&T Analyst

William V. Power upgraded Netflix from Neutral to Outperform and raised the price target from $350 to $415.

The analyst downgraded AT&T and Comcast from Outperform to Neutral and lowered the price targets for the stocks from $41 to $33 and from $50 to $38, respectively.

Takeaways On Netflix, Comcast, AT&T

Netflix has continued to gain market share at the cost of linear television, and the COVID-19 pandemic has resulted in strong subscriber trends globally, Power said in the Monday note. (See his track record here.)

While there had been concerns around new entrants in the space, Netflix has greater revenue leverage due to subscriber upside, the analyst said, adding that the company’s free cash flow could turn positive in a few years.

Netflix has $5 billion in cash and seems well-positioned in the near term, although it may need to raise additional capital after 2021, Power said.

Comcast has exposure to the U.S. and Europe, while AT&T is saddled with DirecTV, the analyst said. The two companies' media assets could face near- to medium-term challenges, he said. 

Both companies are facing severe headwinds, Power said. 

“CMCSA faces significant near-term pressures across its NBCU portfolio, including broadcast, theme parks and film and may take longer than expected to recover. T's WarnerMedia will feel most of its pain in Turner, the biggest segment, due to the loss of live sports, along with film.”

Netflix, Comcast, AT&T Price Action

Netflix shares were trading 4.93% higher at $349.25 at the time of publication, while Comcast shares were down 3.01% at $32.36 and AT&T shares were falling 8.05% to $26.16. 

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