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Published: April 9, 2012 at 11:53 PM GMT
Last Updated: April 9, 2012 at 11:53 PM GMT
Analysts were busy trying to read the tea leaves of the after-effect of Best Buy's (BBY) really poor quarterly performance. The stock was down almost 7% after posting domestic comps of −2.2%, with weakness in consumer electronics (−4%), entertainment (-21%), gaming, notebooks, and TVs. Most of all, how would giant online retailer Amazon.com (AMZN) be impacted by what appears to be weakening consumer demand?
JP Morgan's Doug Anmuth took a stab at addressing this question and he thinks the Best Buy news is a mixed bag for AMZN. "Though BBY's results do not bode well for parts of AMZN's Media (including gaming, entertainment) and EGM (including a large CE component) segments, we have historically not seen significant correlations between AMZN's North America revenue growth and Best Buy's domestic comps potentially due to share shift issues," he wrote in a note to investors on Thursday.
Nevertheless, the online seller is seeing similar category weakness in gaming, notebooks, and some segments of CE over the past few quarters. The JPM analyst believes AMZN's current estimates take this softness into account and is actually incrementally positive on AMZN's business off of some BBY store closings.
The DirecTV Group (DTV) held its 2012 Latin America Investor Day this week and the tone was positive enough to get Credit Suisse's Stefan Anninger to raise his estimates on the stock. Citing a bullish 5-year plan to double DTV LatAm subscribers (to +16 million) and grow to $10 billion in revenue and $3 billion in EBITDA, the analyst raised 2012 FY EPS to $4.32 (up from $4.29). While DTV's LA division has piqued investor interest, Anninger expects near-term uncertainty to cast a shadow on the stock — despite what he feels is "a relatively undemanding valuation." He's maintaining his Neutral rating.
The massive L.A. Dodgers deal sealed this week reads through quite positively to the owner of the Atlanta Braves, Liberty Media Corporation (LMCA). As details of the transaction emerge, it appears a consortium led by Magic Johnson value the baseball franchise at $2.15 billion — essentially valuing each TV household at $386, up nicely from the average of $315 paid for Major League Baseball teams over the past 3 years.
Using this transaction as a comparable, Janney's Tony Wible believes the Atlanta Braves, bought by LMCA for $450M in 2007, should be worth around $900 million. This is further upside to his fair value on the media conglomerate's assets, which include Starz and Sirius/XM Radio (SIRI). He brings his firm's price target up to $107 (from $105) on LMCA.
Barclays Chris Merwin published an update on TV ratings this week and CBS (CBS) emerged a winner in a week all about March Madness. Popular match-ups in NCAA basketball, as well as good performances by How I Met Your Mother and Two and a Half Men, propelled the firm to easily trounce second place Fox. By the way, CBS CEO Les Moonves mentioned this week that with all the cash piling up from retrans fees and a healthier ad market, he's considering raising his firm's $0.10 quarterly dividend.
Total company ratings for Discovery Communications (DISCA) were up 13% on the week and the Internet and Media analyst seemed truly impressed by DISCA's ability to buck the trend of declining cable network ratings.
Disney's (DIS) cable networks put in a good showing for a second consecutive week. In an investment missive, the Barclays analyst drew attention to ABC Family (up 14%, off the premier of The Blind Side) and ESPN (which also rode the interest in the NCAA basketball tournament).
With 2012 set to be a record year for the domestic box office, Nomura launched coverage of U.S. theaters. In an initiation piece published this week titled Walk the Line, analyst Robert Fishman forecast that revenues for the industry should rise 6.6%, hitting $10.85B this year, led by The Dark Night Rises and a strong holiday season. He kicks off his coverage on Cinemark Holdings(CNK) with a Buy rating and a $26 target. Fishman believes the firm is "uniquely positioned to capture record 2012 U.S. box office" with good exposure to a growing international business.
The analyst is less bullish on Regal Entertainment Group (RGC). As a company, Regal is definitely poised to benefit from what's widely expected to be a great year for film receipts -- with solid margins and strong capital returns through dividends. But as a pure-play domestic theater, the analyst is concerned about RGC's exposure to long-term declining secular trends. He's got a $15 PT and a Neutral rating on the stock.
Anthony DiClemente, an analyst at Barclays, tried to name his price on online travel agency, Priceline.com (PCLN). He took his 2012 PT up to $800 (from $725) as he believes that PCLN deserves a better-than-market multiple on its $32.16 in earnings per share he expects this year. The firm continues to perform valiantly in Europe and according to the analyst, "still has a very robust growth runway ahead." Even with this increased bullishness, if Europe can get its macroeconomic problems under control, DiClemente believes Priceline has even more upside.
"PCLN's stock has a strong chance to outperform given the elimination of one of its biggest potential negative catalysts," he wrote in an investment report about the firm.
The nation's interest in the NCAA college basketball tourney is driving ratings increases at CBS and Disney' ESPN — so much so that News Corp (NWSA) may want in on the game. Bloomberg reported this week that the media conglomerate was readying plans to launch its own dedicated sports network to rival ESPN. Barclays' Perry Gold sees this possible interest driven by the increase in sports franchise values (see our blurb on LMCA) and good leverage in negotiations with affiliates of sports programming, While this new network would increase competitiveness in sports programming, the analyst believes it could represent another leg of growth for News Corp.
"It's still too early to know whether the network will be successful, but with subscriber growth flattening out in the mature U.S. pay-TV market, a new under-distributed channel would be a source of domestic growth for the cable networks business," he wrote in an analysis he sent to investors this week.
Needham Research's Laura Martin was busy this week, tweaking estimates and ratings of media firms in her coverage universe. Here's a quick-and-dirty summary of the slew of research she published this week:
It's not often that governmental crack-downs on offshore tax evasion benefit stocks…unless you're Sapient Corporation (SAPE). After reviewing the guidelines for the Foreign Account Tax Compliance Act (FATCA) were released by the IRS and U.S. Treasury, BMO analyst Dan Salmon raised his 2013 estimates on SAPE. The analyst believes FATCA will compel many foreign financial institutions — some clients of Sapient — to upgrade their compliance and reporting systems.
The analyst expects revenue growth in 2013 in SAPE's Global Markets group to rise to 10% (from +6%) with total company revenues rising 17% (up from 16%). He's taking up his above-consensus 2013 EPS estimates a penny to $0.81 and is sticking to his $15 price target.
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