With the rapidly changing business outlook due to Covid-19, several local and national ad categories are cancelling or reducing ad budgets – pulling back much more than in the financial crisis. As a result, we expect consensus estimates to move significantly lower, likely in a series of downward revisions in the coming months. We believe it’s too soon to get constructive on the media sector and we are downgrading ETM and IHRT to PP from OP, and prefer OP rated NXST for investors looking for exposure to the sector.
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Due to a realignment of resources, we are withdrawing coverage of BBGI, CABO, and TGNA. Our final ratings, price targets, and estimates should no longer be relied upon.
The hottest names this week were WWE (1,474 bps better than the S&P), NFLX (1,373 bps), AMCX (774 bps), CABO (771 bps), and DISH (388 bps).
By all accounts the COVID-19 pandemic is still in the early innings, but we wanted to adjust our estimates for what we know right now, which is that: 1) Universal’s parks are closed for the month of March, 2) Fast & Furious 9 has been moved and many theaters shuttered, 3) the NHL season has been suspended, and 4) the Olympics are still on – at least for now. We adjusted our model for these facts, and some sluggishness into Q2 as we do not expect the recovery to be immediate but note that there are likely more revisions to come as the impacts of the pandemic evolve. Bottom line: We reduced our ’20E revenue and EBITDA by 1% and 4% respectively (you can see our detailed changes in Exhibit 4 on page 5) and are reducing our YE 2020 Price Target to $46 from $53. That said, we remain outperform and believe the current market dislocation provides a nice entry point for investors with a LT investment horizon as CMCSA’s largest business (broadband internet) is recession resistant and has become even more important to customers during this crisis.
The hottest names this week were AMCX (1,278 bps better than the S&P), TGNA (1,030 bps), MDP (706 bps), FOXA (348 bps) and CMCSA (174 bps).
Similar to last week, there wasn't anything particularly hot about the market this week - but, we remind you that our What's Hot What's Not is all relative. On the bright side, at least this see-saw week has come to an end, TGIF.
While there wasn't anything particularly hot about the market this week, we remind you that our What's Hot What's Not is all relative. On a positive note, we finally made it to the end of this rough rough week, TGIF.
Though the various acquisitions make it hard to compare the results vs. expectations (recall Fidelity closed 10/1/19, and Clear Wave closed 1/1/19) – revenue, EBITDA, and HSD subs grew 3.5%, 7.9% and 3.6% excluding the new operations, so we think it is safe to say that trends overall are reasonably consistent. On the call we learned that the video price increase was implemented a month later than usual, the company will no longer guide capex, and mgmt. is continuing to look at various M&A/strategic investment opportunities. That said, there was nothing truly surprising in the print or call that changes our overall thesis on the stock – we like the operations and roll-up strategy but continue to struggle with valuation given CABO’s mystifying multiple (a 5x+ premium to cable on ’20 EBITDA). At the end of the day, we remain Peer Perform with no price target.
Revenue and EBITDA were ahead of our expectations by 100bps and 320bps respectively – and interestingly it was driven by international which beat low (or really, rock bottom) expectations, while the Americas was only a tiny bit weaker than the sky-high expectations. That said, though International beat and Americas missed, the domestic business is clearly the healthiest given the 4.5%/5.0% growth in revenue and EBITDA, respectively, and 2020 guidance of MSD revenue growth and MSD-HSD EBITDA growth (vs. our +3% expectation). Overall though, while we liked the print and guide, the company’s 8x leverage continues to make us a bit uncomfortable – and we’re not convinced a strategic disposition to reduce this will happen in the short term. Thus, we remain Peer Perform with a $3 Year-End 2020 Price Target.
Q4 revenue was $745MM (+1% organic, ex-FX) vs. our $738MM (+0.2% organic, ex-FX) and Consensus’ $739MM. The beat was primarily from International, which was ahead by $10MM as America’s revenue of $345MM (+4.5%) was slightly below our $347MM (+5.0%).
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