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Published: March 30, 2012 at 08:35 PM GMT
Last Updated: March 30, 2012 at 08:35 PM GMT
Scripps Networks Interactive (SNI) announced on Thursday that it would acquire Travel Channel International (TCI). The UK-based programmer with distribution in over 90 countries will play an important role in Scripps' international growth strategy. According to Barclays' Anthony DiClemente, "We think that TCI will not only integrate seamlessly into SNI's Lifestyle Media brand, but also help SNI gain a more significant foothold in international territories that could help drive above-peer growth."
The $100+ million acquisition still leaves significant cash in SNI's coffers for more M&A or dividend boost, according to the analyst.
Goldman Sachs analyst Heath Terry did more than just slap a 'BUY' rating on LinkedIn (LNKD) — he breathed additional life into the stock. Coming in with a monster $135 price target (almost 50% upside), the analyst pushed the stock up over 8% on the news. He sees strong enterprise adoption as recruiters continue to flock to the product over more expensive alternatives. The "Hiring Solutions" business, already 50% of LNKD's revenues, is expected to show 45% CAGR over the next few years. Even LinkedIn user ranks are swelling — at 150M now, they're up 60% year over year. With only 4% international penetration, maybe the business network actually hits Goldman's over-sized expectations?
If investors believe that TV is really going everywhere, there is now another way to play out that thesis. Needham launched coverage of recent IPO'd, Synacor (SYNC), this week. The firm designs and hosts websites to deliver over-the-top content (OTT) for multimedia firms like Major League Baseball, Verizon, Hulu, Netflix, and Amazon. Analyst Laura Martin has a $8 PT on the stock. The stock is almost there already, up over 40% since it floated. She likes the network effects of SYNC: it sells display and search advertising across the 22M subscribers it reaches through its clients' websites and then shares back that revenue with its clients. With multiple expansion, P&L upside, and an apparently inexpensive valuation, Needham likes the stock.
Dan Salmon at BMO wanted to pull back the covers a bit on the future of Yahoo! (YHOO) and its display advertising business. To do so, he interviewed a top 200 publisher who was willing to share her view of the market. The short of it all is that the AOL-Microsoft-Yahoo ad alliance will likely be too small and too vertically-focused to make a real dent. Plus, given the industry dynamics and Google's massive lead, it doesn't appear that there's a clear potential bidder for Yahoo's display biz. Salmon's got a $17 PT on the online media company.
The other side of this investment coin is that this discussion lead BMO to believe that Google's (GOOG) growing lead in display advertising is under-appreciated by the investment community. Citing the fact that "the value of unified data is huge", the analyst came away more bulled up on the Google thesis. He didn't change his rating, though, which is OUTPERFORM with a price target of $730.
We wrote last week in the Wall Street Report of the growing panic in the investor community surrounding Disney's (DIS) blockbuster flop, John Carter. Disney itself said it could lose up to $200M on the film. Bernstein Research's Todd Juenger isn't fazed by all the negativity, in fact, calling for investors to "write off the write off," He doesn't see any long lasting impact from the disappointing film and advised investors to buy DIS on any weakness. He's sticking with his firm's PT of $50 on the stock.
Nomura's analyst Michael Nathanson isn't surprised so much that DIS needs to take a bruising on the film, but he's "shocked" by the size of the loss. He was expecting the studio division to write down something in the range of $90M. He's lowering his already lowered F2Q estimates to $0.51 (down another $0.05) while FY12 EPS moved to $2.90 (from $2.96). Despite all this, the analyst wrote to clients that he's still confident in the health of Disney's core properties (parks and media networks). He'd also take advantage of any dips in the stock.
Credit Suisse's Spencer Wang echoes his competitor's sentiments. While also surprised by the size of the announced loss, he likes the media conglomerate's upcoming movie slate, which includes The Avengers and Brave. He's maintaining his $45 PT.
BIA/Kelsey was out this week with its local advertising forecast and things look good. The firm sees compelling growth in digital local ad spend through 2016. According to the firm's forecast, local digital advertising revenues (including mobile) will rise from $21.2 billion to $38.5 billion by 2016, representing a compound annual growth rate (CAGR) of 12.7 percent. As we've written repeatedly in the Wall Street Report, growth in digital is expected to offset slowing revenue growth in total local media advertising revenues (which the firm believes is growing at a 2.6% CAGR over the same period).
Streaming radio play, Pandora Media (P) will need a chunk of those local ad revenues as more and more of its users are accessing its service via mobile. Credit Suisse launched coverage of Pandora this week with a Neutral rating and a target price of $12. Analyst John Blackledge sees continued usage growth and improving monetization but is concerned that rising content costs will limit upside over the next couple of years. For example, 70% of P's listening is done through mobile devices but mobile only accounts for a bit over 50% of its advertising revenue. CS sees content costs rising from 54% of revenue in 2012 to over 60% in 2013. Rising usage is a good problem to have and P will have to ramp up its mobile ad sales efforts accordingly for CS and Blackledge to get more bullish on the name.
While Pandora's usage is taking off, Barclays published its monthly U.S. Internet Online Travel report. This month's data shows improving traffic growth trends for Expedia (EXPE) and Priceline (PCLN). PCLN has booked its place as the most trafficked online travel agency globally by unique viewers, according to comScore. PCLN's performance bodes well for TripAdvisor (TRIP), which, according to a read-through of its recently published 10-K, said its second largest customer (assumed to be Priceline), accounted for 16% of its business in 2011, up from 10% a year before.
After the close of the market on Monday, Amazon (AMZN) announced it would be expanding its eCommerce infrastructure with the acquisition of Kiva Systems. JP Morgan analyst, Doug Anmuth likes the $775 million cash deal because it "further expands Amazon's industry-leading capabilities in eCommerce fulfillment". Kiva will help modernize AMZN's fulfillment by automating the "pick" in the online seller's pick-pack-ship process. Anmuth sees an increase in initial capex outlay for AMZN, though "we expect significant reductions to fulfillment unit costs over time".
Monster Worldwide (MWW) hosted an innovation day for investors Thursday. Top of mind for everyone is how and when Monster actually gets a strategic alternative done. John Blackledge at Credit Suisse had this to say about the process to unlock value: "MWW noted that potential suitors for the business include financial buyers, staffing firms and other players that may be interested in MWW's global reach (MWW operates in 55 countries), technology (semantic search, etc.) and/or its job board." While suitors are beginning to surface, timing is still way up in the air for a purchase of MWW, one of its geographies, or a strategic tie-up.
Well, Apple (AAPL) finally announced what it would do with all that cash (about $100B). Using a mixture of dividend payments and stock buybacks, has the massive consumer electronics company set a new trend to be imitated by other cash-rich internet media firms like Priceline (PCLN), eBay (EBAY), and Google (GOOG)?
This was a question posed this week by Barclays analyst, Perry Gold, in a note to investors. The analyst sees Google as the most probably candidate for returning cash to investors, saying "Any move to return capital would allow investors to better appreciate GOOG's cash and cash flow and could boost valuation as P/E ex-cash could become more relevant as it seems to for AAPL." Barclays believes AMZN is probably the least likely to return its cash pile because the online retailer needs it as fuel for growth through M&A.
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