Looking back to prior downturns, media companies were often viewed as early cyclicals, but secular issues have changed that narrative for many. That being said, April should mark the bottom for the industry, with declines of 50%+ in some markets, with even digital down 40%+ for many. For traditional media, we continue to believe the recovery in advertising will be flatter and take longer than anticipated, with risk to estimates into 2021.
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When we lowered our core advertising estimates on April 1st, we noted that 2Q political advertising had slowed. After an extraordinarily robust 1Q20 for political, 2Q20 has weakened mainly due to 1) both Bloomberg and Bernie dropping out of the Democratic presidential primary and 2) campaigns / PACs reluctance to air ads during these uncertain times. We now assume 4%-5% growth for spot TV political advertising to ~$3.25B, with risk to the downside (vs. our prior $3.37B, +9% Y/Y growth).
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).
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.
The hottest names this week were WWE (706 bps better than the S&P), SSP (493 bps), DISH (338 bps), NFLX (228 bps), and ATUS (185 bps). DISH’s print was hot – with really nice financials (revenue and EBITDA beat Consensus by 300bps and 1,600bps respectively) and satellite sub additions (beat Consensus by 22k) outweighing the large Sling subscriber miss (below Consensus by about 200k). Unfortunately we didn’t get a whole lot of new news on the wireless front, which is what can (and probably will) really move the stock when the time comes.
The NFL’s TV rights negotiations are about to HEAT UP. Standing in the way is the collective bargaining agreement (CBA) between the league and the players, which the NFL reportedly hopes to wrap in the next few weeks (despite the CBA running through the 2020 season, or another 18 months). According to today’s WSJ, the NFL wants to lock down a new deal ASAP, as ratings were strong this year on the back of young new stars – plus the league wants to get in front of any potential economic downturn or the 2020 Presidential election, which could dampen ratings and hurt its negotiating leverage (i.e. ratings fell 8% in 2016). From the studios’ perspective, we think getting a deal done sooner rather than later would remove an overhang for the stocks – as some investors still question if a meaningful portion of the rights will go to digital players (we strongly disagree).
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