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Published: April 20, 2012 at 01:58 AM GMT
Last Updated: May 4, 2012 at 01:58 AM GMT
The search giant, Google (GOOG) ended up reporting better-than-expected earnings for 1Q12 results while coming in in-line on revenues. The search monolith reported 24% y/y growth, driven by an almost 40% rise in paid clicks. Credit Suisse analyst Spencer Wang raised his 2012 EPS estimates by 3% to $44.19 and hiked his 2013 PT to $770 (from $700).
Barclays' Perry Gold felt he missed the boat on CPCs declines with his overly-optimistic estimate of −4% (CPCs declined 12%) but feels CPCs as only part of the revenue story (and will improve anyway over time). He pumped his PT up to $750 (from $700) on the earnings news.
Next up in the GOOG lovefest was JP Morgan's Doug Anmuth who was satisfied with the tech bellwether's discipline on costs and hiring. He's raising his PT to $730 (from $686) off of strong fundamentals, based on solid desktop search growth and rapid growth in both display and mobile.
The firm also announced a proposal for new Class C non-voting shares — essentially tabling an idea to split the stock while keeping management's control tight over the company. BMO Capital Markets' Dan Salmon thinks it's a non-issue and just another way for Google's founders to retain control over the firm and cash out simultaneously. He liked the numbers on the quarter, too, and notched up his 2012 EPS estimates to $43 from $41.50.
Disney (DIS) appears ready to rock in China after inking a major partnership this week. The media giant announced it will partner with the China Animation Group and Tencent to develop original animated creative in China across TV, movies and digital platforms. This new National Animation Creative R&D Initiative secured $2 billion in loans to help get things started.
Since receiving a downgrade in November from Nomura, CBS (CBS) has run 20% (vs 11% move in the S&P 500). It was a gutsy call and analyst Michael Nathanson was out this week with his own mea culpa. "It is now clearer to us that we were not properly factoring in additional upside from syndication (both domestic and digital deals) and higher retrans fees," he sent in an update note to clients of his firm.
He expects a strong 1Q and adjusts his 2013 EPS upwards by $0.17 to $2.80. He sees this quarter's performance driven by "higher retrans, online syndication revenue as the Amazon deal kicks in, plus the CSI: Miami syndication sale to AMC Network…" While the analyst isn't issuing a re-rating of the stock, he's open to it if he sees ad sales improve. He did bring his PT up to $34 (from $30).
The Needham analyst also raised her EPS estimates for AOL's ex, Time Warner (TWX). She raised her Q1 revenue estimates by 2% to $6.733B and EPS up a penny to $0.63. She likes the strength of the Entertainment division, off of stronger box office receipts from Journey 2 and Project X, as well as DVD releases during the quarter, including Contagion, J Edgar, and Happy Feet 2. The firm reports on May 2 before the market open.
Havas Media announced it would be expanding its Sports and Entertainment division with the acquisition of Ignition, an award winning agency with offices in the USA, London, and Moscow. This M&A strengthens the firm's local footprint in Atlanta and New York in the run up to the London 2012 Olympics and 2014 FIFA World Cup to be held in Brazil.
No, your computer didn't go haywire — AOL's (AOL) stock did rise 43% on Monday. That was after the announcement that the struggling online media firm would sell over 800 of its patents and license 300 more to Microsoft (MSFT) for a bit over $1B in cash.
This left analysts, like Needham's Laura Martin, wondering what other hidden assets AOL might own. With this cash cushion (works out to almost $11 per share), she believes the risk in owning shares has been significantly reduced. She likes CEO Tim Armstrong's decisiveness and is raising her firm's PT by the full amount MSFT paid for the patents, from $20 to $31.
After announcing personnel cuts (2,000 employees) last week that should result in something like $375 million in savings, the question is what's next for Yahoo (YHOO)? Pivotal Research's Brian Wieser believes that one of Yahoo's core assets — its digital advertising business — is facing "structural decline". And it's not just Yahoo's market share. Wieser believes the modern structure of online display advertising is cementing — essentially it's a race to grow audiences faster than overall pricing deflates.
"Most agency professionals we know want Yahoo! to succeed, not least to keep some resemblance of competition with Google in different aspects of Internet advertising, but also because they inherently want to slow the pace at which the industry commoditizes," the analyst wrote this week.
This week was also all about Apple (AAPL) TV. Well, not really, but Barclays' Ben Reitzes decided that the likelihood of the consumer electronics giant entering the TV business warrants a deeper look at its implications. And the analyst is pretty bullish on the ability for an Apple TV to penetrate the $345B TV hardware market and via iTunes to continue to capture a piece of the $18B home video market.
That said, the U.S. Media analyst doesn't see AAPL disrupting the core content model: "However, in our view, the $62B TV advertising market and $29B TV affiliate fee pool are unreachable, even for Apple. Content owners will fight tooth and nail to protect their ownership of digital rights and the time-honored format of the video bundle.
JP Morgan's Bo Nam is out with a report on online gaming firm, Zynga (ZNGA) and, admittedly, is a bit nervous about competition. You see, the analyst likes the recently announced acquisition of OMGPOP and believes that the startup's title, Draw Something, could have legs over the next few years. He's even comfortable with the acquisition price (rumored to be around $200M). But ultimately, how defensible is this gaming business anyway?
Wrote Nam, "However, that a one-off game from a small company could climb the digital gaming charts so quickly and displace other established games suggests the competitive moat may not be quite as wide as we originally thought." That prompted JPM to lower its PT on the casual gaming company from $15 to $14.
Also on Monday, AT&T announced it sold a majority position in AT&T Advertising Solutions and AT&T Interactive to an affiliate of private equity firm, Cerberus. This change of control could have been concerning to Marchex (MCHX), which derives around 25% of its revenue from its partnership with AT&T's "The Real Yellow Pages."
Not to worry, says Dan Salmon, an analyst at BMO Capital Markets — there's a change of control provision in the partnership contract. He sees an incremental positive from this transaction as new owner, Ceberus will probably get a lot more serious in monetizing its new asset and use Marchex call analytics and diversified call network more and more to do so. He's got a $10 PT on MCHX.
Shutterfly (SFLY), the digital photo firm, gave investors a "Treat" this week. That's the name of its new offering — Treat.com — targeting the 1-to-1 greeting card market. Barclays' Mark May believes the greeting card opportunity to be $8.5 billion in the aggregate, the majority of which still exists offline. Already a fan of SFLY, the analyst is excited by this launch and the new service and revenue opportunities spawned by it. He sees a ton of upside (+49%) for the stock and reiterated his Overweight rating with $40 target.
Speaking of photo sharing services, investors couldn't escape the news this week that massive social network Facebook would acquire photo sharing service, Instagram. Jon Stewart might have mocked the acquisition, joking, "A billion dollars of money? For a thing that kind of ruins your pictures?"
But, other analysts, like gigaOM's Om Malik, see a method to CEO Zuckerberg's madness. Explained Malik, "If there was any competitor that could give Zuckerberg heartburn, it was Systrom's posse. They are growing like mad on mobile, and Facebook's mobile platform (including its app) is mediocre at best." From this perspective, Instagram's largest asset — a passionate community — can be the antidote to Facebook's lack of soul and emotion.
Mark May at Barclays was banging on the table this week about IAC/InterActiveCorp (IACI). He increased his earnings estimates and hinted that there may also be further upside in IAC's quarterly performance when the firm reports its 1Q12 earnings on May 2. He's sticking with his Overweight rating and $58 PT, driven by stronger margins at the firm's dating site, Match.com.
"Despite the 54% increase in the stock over the last year (vs. the NASDAQ at 8% over the same period), we still view the valuation as reasonable at 7x EV/CY12 EBITDA," he wrote in an earnings preview sent to investors this week.
Well, after that downer, it's good to read about the revenue opportunities online travel agency, Priceline.com (PCLN) is pursuing. News made the rounds on Tuesday that the firm's Booking.com subsidiary was launching a mobile app to offer last-minute hotel deals at up to 50% off. This is sort of a copycat offering, as many of the firm's competitors already have a big toe in the daily deal market. But investors were excited — PCLN stock hit a new 52 week high on the news ($775).
Goldman Sachs' analyst, Drew Borst sees this deal "as "a sign that China is committed to improving the competitiveness of its entertainment industry". The entertainment analyst believes this partnership puts additional pressure on DreamWorks Animation (DWA) which launched its own Chinese alliance just two months ago.
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