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MSG, Activision, Yahoo, DISH, AT&T, Amazon, Microsoft: Media Wall Street Report 12-23

December 23, 2011
Business Fortune Cookie

Published: December 23, 2011 at 03:38 PM GMT
Last Updated: July 31, 2013 at 03:38 PM GMT

Media firms are expanding into telecommunications and vice versa. Moves this week show the chess game being waged to control content, measurement, and distribution.

Needham tipped off their initiation of Madison Square Garden (MSG) with a buy rating and a $37 price target. As the holding company for the Forbes-ranked #1 most valuable NBA franchise, the New York Knicks and the #2 NHL team, the New York Rangers, analyst Laura Martin likes what she sees. Citing three near term catalysts, rising ticket prices, strong Ranger performance and higher ROIC, Needham's analyst believes MSG is positioned strongly in an era that values brands, sports, and live events.

World of Warcraft continues to lose players – in line with investors' expectations – according to a recent Goldman Sachs report on parent gaming company, Activision Blizzard (ATVI). The game accounts for 40% of 2011 operating income for Activision and has lost about 2 million paying players this year. Goldman sees lighter story-lined, more frequently-updated and free-to-play games becoming more popular for gamers, competing with WoW. But even with these declines, GS's Brian Karimzad maintains his buy on ATVI, based on expectations of new game Diablo 3 and an expansion pack for WoW.

Investors pushed Yahoo! (YHOO) stock up on the back of a New York Times story that the media firm's board was considering a sale of the company's Asian assets. The proposed deal values Yahoo's 40 percent in Alibaba at about $12 billion, and its 35 percent stake in Yahoo Japan at about $5 billion. Needham's analyst Laura Martin applauded the proposal's terms. "Since cash and equivalents at 9/30/11 were $2.8B, that would imply that, at current valuation levels, YHOO shareholders would be valued at almost nothing for the US search and display internet advertising businesses," she said in a note to investors. JP Morgan's Doug Anmuth likes the deal as well and sees a stock worth over $20 eventually. According to Needham's Martin, the biggest risk to this deal is that without a CEO, no one's quite confident what the firm would do with the cash influx.

Investors quickly disembarked from TripAdvisor's (TRIP) spinoff this week from parent Expedia (EXPE), sending the stock down almost 20%. While Barclay's Perry Gold may be somewhat cool on Expedia, he does like TRIP's leadership in online travel advertising and strong market positioning. He has a $30 price target on the new spinoff and $34 on EXPE, post transaction.

Now that ATT's (T) $39B takeover bid for T-Mobile's officially over, investors scurried to identify the next target. DISH Network (DISH) emerged as perhaps the next company that ATT acquires, and stock surged over 8% in strong trading this week.

If it's all about acquiring spectrum, DISH appears to be a smart choice. On AT&T's plans, Stifel Nicolaus' Chris King says: "It's either DISH or waiting for the next spectrum auction." The analyst said because DISH has no wireless customers, and AT&T doesn't provide TV nationally, regulators may consider a proposed deal more kindly than they did the T-Mobile merger.

If investors had any reservations about Amazon's (AMZN) seriousness towards its tablet Kindle line, they were shattered this week by a Reuters article that said the firm had considered making a bid on mobile phone play, RIM (RIMM). While no formal bid was entered, JP Morgan's Shelby Taffer believes the interest in RIMM stemmed from AMZN's intention to "build its patent portfolio to defend the Kindle Fire from lawsuits that have plagued other Android device manufacturers such as HTC and Samsung." Amazon also reported this week that Kindle sales are tracking strongly, selling about 1MM per week in the holiday season, despite some mixed reviews of the device.

Telco 2.0 published its analysis of the top 7 strategy themes of 2011 in telecommunications. These themes, which include disruption by new media players like Google and Facebook, cloud services, and connected TV comprise a 284 page report the research company recently produced on the industry.

A sign of the times or just bad publicity? GigaOM reported that long-standing keynoter at the Consumer Electronics Show, Microsoft (MSFT), will not be headlining the event in years to come. According to GigaOM's Barb Darrow, "The CES stage gave Microsoft the opportunity to show that it could do more than business productivity software, that it could be a player in the cool world of consumer electronics." The software firm has been hit-and-miss in its foray into consumer electronics – with successes like the Xbox and Kinect and big flops like the Zune. MSFT was up 1% in trading this week.

"Now they're frenemies." At least that was the title of DB's Matt Chesler's research piece about a settlement made this week between two media measurement leaders, comScore (SCOR) and Nielsen (NLSN). Long an overhang for comScore stock, Chesler believes the resolution of this intellectual property dispute clears the way for both companies to collaborate in the future. They share customers, similar approaches to data collection, and are both strong internationally.

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