Skip to main content

Market Overview

BofA's Media Downgrade Spree: ViacomCBS, Discovery, iHeartMedia

Share:
BofA's Media Downgrade Spree: ViacomCBS, Discovery, iHeartMedia

The media sector is an "industry in transition" and several legacy media giants aren't ideally positioned moving forward, according to BofA Securities.

The Analyst: Jessica Reif Ehrlich downgraded the following media names:

ViacomCBS Inc (NASDAQ: VIAC) from Neutral to Underperform, price target lifted from $30 to $32.

Discovery Communications Inc. (NASDAQ: DISCA) downgraded from Neutral to Underperform, price target lowered from $32 to $25.

IHeartMedia Inc (NASDAQ: IHRT) downgraded from Neutral to Underperform, price target lowered from $12 to $10.

Related Link: Roku Surges To All-Time High After HBO Max Deal, Stock Gets New Street-High Price Target

The Viacom Downgrade: The new bearish case for Viacom's stock is based on:

  • The resumption of scripted content will negatively impact free cash flow.
  • Lack of clarity on incremental marketing, tech, and content spend related to the 2021 Paramount+ rebrand.
  • Viacom may be losing the streaming video race as other major studios accelerated their streaming ambitions.
  • Continued "overhang" from the National Football League.
  • Delayed theatrical releases.

The Discovery Downgrade The case against Discovery's stock is based on:

  • Unclear signs of how successful Discovery+ will be and what impact a streaming platform will have on linear TV viewership.
  • Higher competition adds pressure to Discovery to create "must-have" content.
  • Competition with substitute products like YouTube.
  • Long-term streaming EBITDA margin estimates of around 20% are "significantly lower" versus cable networks at more than 40%.

The IHeart Downgrade: IHeart media boasts a "healthy" liquidity position, manageable debt levels, and potential benefits from Liberty Media increases its stake up to 50%, the analyst wrote. However, investors may want to avoid the stock given:

  • Low visibility on terrestrial radio advertising trends.
  • An "elongated" recovery timeframe.
  • No near-term compelling catalysts.
  • High leverage of10 times 2020 net debt/TTM EBITDA.

Price Action: Shares of ViacomCBS were trading lower by 3.3% at $35, while shares of Discovery were down 2.5% at $28.02 and shares of iHeartMedia were lower by 4.5% at $12.08.

 

Related Articles (DISCA + IHRT)

View Comments and Join the Discussion!

Posted-In: BofA Securities Jessica Reig EhrlichAnalyst Color Downgrades Price Target Small Cap Analyst Ratings Media Best of Benzinga

Latest Ratings

StockFirmActionPT
NIUDaiwa CapitalInitiates Coverage On41.5
QMCONorthland Capital MarketsInitiates Coverage On12.0
IBKRJefferiesInitiates Coverage On89.0
MRETFTD SecuritiesDowngrades18.5
SWKSGoldman SachsDowngrades135.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com