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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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.
CMLS had a solid Q4 print, with revenues coming in-line and EBITDA beating by 13% on lower expenses. But, the Q1 revenue outlook was a bit disappointing, as same station revenues ex. political is pacing “down LSD” – implying that spot and network (which we define as “core”) is pacing down in the 3-4% range, lower than our -1% expectation. The weakness in core seems to be broad based across local, national and network, a slowdown from what we saw in most of 2019. With the core business continuing to be challenged, we find it tough to be excited about this name – hence, our Peer Perform rating.
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.
After reviewing our model ahead of the Q4 print, we fine-tuned our estimates to better incorporate the impact of CMLS’s recent divestitures / swaps (5 in total), all of which closed in Q2 and Q3 of 2019. Specifically, we tweaked the cadence of our 2020 quarterly estimates to better incorporate the timing of the transactions. Net of all the changes, our 2020 revenue and EBITDA stay pretty much the same – declining by less than 30bps each, as shown in Exhibit 1 on pg. 2. With our FY estimates staying relatively intact, our YE 2020 price target of $19 remains the same.
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).
The hottest names this week were ETM (866 bps better than the S&P), MDP (652 bps), NFLX (375 bps), SSP (299 bps), and GTN (199 bps).
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