Rosenblatt Lists Its Internet Media Favourites Whose Performance Seem To Be Driven By Recession Concerns

Rosenblatt analyst Barton Crockett noted that Internet, Media, and Experiential equities underperformed the S&P 500 in 2Q22 and 1H22 of generationally high stock pressures (the worst S&P 500 start since 1970). 

In Rosenblatt's 28 stock universe, every equity fell in 2Q22. Those that generally outperformed the S&P 500's 16% decline in 2Q22 (but not always) appear to be those with stability in recession scenarios. 

Strong performance, turnarounds, or sale processes provided limited or no respites. He concluded that in this sector, and probably the market overall, recession fears drive performance.

The best stock in his coverage universe in 2Q22 was Twitter Inc TWTR, down only 3%, thanks to Elon Musk's merger offer. The shares were 31% below his $54.20 offer price, which he assumed was cut to near current levels before closing.

By dropping only 7% to 13% in the quarter, Sirius XM Holdings Inc SIRI, Liberty Formula One FWONK, and Liberty Braves BATRK also outperformed the S&P 500. 

Cable companies Charter Communications, Inc CHTR, Liberty Broadband Corp LBRDK, and Comcast Corp CMCSA also made the above-the-index cut.

Also holding up better than the index, with a decline of 14%, was Nexstar Media Group, Inc NXST, he noted. 

He believed that solid political ad spending and the continued ability to extract higher fees for carriage by pay-TV services could mitigate the TV station advertising's risk of a recession. Additionally, Nexstar has a history of effective capital allocation, including acquisitions and share repurchase.

He saw concert specialist Live Nation Entertainment, Inc LYV operating at arguably its best level ever, with solid demand for events and spending at events. Yet its shares were down 30% this year. 

Walt Disney Company's DIS theme parks were surging, with more to come from a likely return of international visitation and cruise ships. He noted that Disney+ sub-growth should accelerate after launching in over 50 countries this quarter and ramping up new show production, with evidence of solid viewership. Yet its shares are down 31%. 

His covered Consumer Internet stocks declined 27% on a weighted average basis in 2Q22. Media dropped 30%, and Experiential fell 23%.

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