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Published: February 17, 2012 at 10:54 AM GMT
Last Updated: July 31, 2013 at 10:54 AM GMT
Analysts are softening their forecasts for some of the old guard while recent media IPOs are looking really strong in 2012.
Time Warner (TWX) reported solid earnings, posting EPS of $0.94, also beating most Street estimates on its reported revenues, up 5% to $8.193B. The firm is seeing improving ad trends across its TBS unit, with network ad spending pacing up mid-single digits. TWX also bought back $4.6 billion in stock in 2011 and authorized another $4B simultaneously with its 4Q earnings release. Credit Suisse's Michael Senno continues to like the TWX story. "In our view, TWX offers solid underlying growth, less cyclical risk, consistent capital returns to shareholders and undemanding valuation," he wrote in a note to investors this week, raising his price target to $45 from $40. An 11% dividend increase (to $0.26/share) didn't hurt. The stock barely moved on the news, though.
Barclays Capital's Anthony DiClemente is a little less taken by the TWX story. He expects Film to have tough comps in 2012, though is slightly more positive on the Networks segment. He reluctantly raised his PT $1 to $39, based on rising EPS estimates. Bernstein Research's Craig Moffett also wasn't so impressed, "Other key underlying metrics – especially churn rate – were meaningfully worse than expected ... and guidance was light. Is this what the bottom looks like?" he asked. Needham's Lauran Martin similarly stuck with her HOLD rating on the giant media firm. Nomura also feels like the firm is sputtering out of growth fuel with home video, video games and TV syndication comps getting real tough in 2012.
Tony Wible at Janney sees the digital transition gaining speed at TWX, citing $5.5 billion in backlog of content agreements, which should increase with new digital players. He's optimistic that these revenues can at least partially offset ad weakness.
Rupert Murdoch's News Corp (NWSA) reported fiscal 2Q adjusted EPS of $0.39, above Goldman Sach's analyst, Drew Borst, expectations. The firm also allayed fears that it would back down on its own share buybacks, instead committing itself to another $5 billion worth in 2012. A tough season in Print didn't seem to impact operating income, which grew 23% year to date. Operating income beats on better scatter pricing for FOX and adjusted EPS was $0.39, a nickel better than consensus estimates. Borst raised his 2012-13 EPS by 3%.
Nomura's Michael Nathanson was impressed by strong studio results (bolstered by an estimated $150M in new digital money) and he took his PT up $1 to $22 on rising estimate changes. Laura Martin at Needham was similarly impressed by operating EPS which came in 26% above her estimates, but she sees P&L headlines lurking ahead, impacted by publishing in the UK and Australia.
Scripps Networks Interactive (SNI) put up some impressive numbers. Revenue hit $553M, up 10% yoy and EPS was reported at $0.84, up 16% over similar time frame. SNI raised its FY2012 guidance, estimating 8-10% revenue growth with a corresponding rise in programming expenses (13-15%). Needham's Laura Martin thinks the stock is cheap here with a 8.7% free cash flow yield. She's got a $62 TP on the stock.
While the quarter came in mixed for SNI (EPS was ahead but other metrics came in a bit short), Chris Merwin at Barclays believes that management may be sandbagging future estimates, setting up an investment cycle that should pay off in 2013 and beyond. Nevertheless, he took down his expectations for 2012 EPS from $3.25 to $3.14. Goldman Sachs was disappointed with the operating costs guidance. Their analyst, Drew Borst was frustrated with revenue guidance as well and rings the worry bell on rising programming costs and non-program costs.
Needham's media analyst Martin is much more a fan of Madison Square Garden (MSG). In an update sent to investors, she said, "There is no large public company that participates in the growth of the NY economy more than MSG. An investment in MSG is a call on the spending trends of affluent visitors and residents to NYC."
That may be so but the NBA work stoppage benched MSG last year. The firm's 2Q2012 reported revenue was $373 million, down 14% from a year ago and 4% above her estimates. EPS was $0.44, down 22% year over year and 48% above her firm's forecast. The firm delivered some bad news during its earnings call, disclosing that Time Warner Cable (TWC) had stopped carrying MSG's Fuse Channel and MSG Networks over the past 2 months, "value-destructive" for both firms (TWX accounts for 18% of fuse subs and 30% of MSG's).
Valuation is tough to compute on MSG, which also owns stakes in NY sports franchises including the Rangers and Knicks. She's got a 12 month PT of $37 on the stock. While the stock didn't move much on the earnings news, it is up 12% over the past 3 months.
As Facebook continues to gear up for its impending IPO, founder Mark Zuckerberg has made it clear that he's focused on growing the firm's China penetration. He's determined to get China's 500M Internet users to Like him. And Facebook's founder is cementing his influence over his dorm room experiment. With Facebook's 2 classes of stock, Reuters Insider believes that Zuckerberg is on his way to become the next Rupert Murdoch in his style of corporate governance.
The Amazon.com (AMZN) train keeps on chugging. This week the online retailer inked a deal with Viacom (VIAB) that will provide access for Amazon Prime members to instantly stream around 2000 TV shows from MTV, Nickelodeon, VH1 and Comedy Central. That's big for Jersey Shore fans but it's even bigger for Amazon as it expands its content offerings on its Kindle tablet devices. Barclays Perry Gold sees this as a positive for Viacom because it helps affiliate fees. He also thinks it's a negative for Netflix (NFLX) as it increases competition, demonstrating AMZN's commitment to a content strategy.
As for AMZN, the analyst believes "this deal adds incrementally to margin concerns…and could portend more similar deals to come." Is Amazon working on a standalone subscription streaming service?
There was a flurry of analyst activity following Disney's (DIS) earnings announcement on Tuesday of this week. As the results set in, Janney's Tony Wible has become increasingly convinced of the opportunities ahead for the media conglomerate. "DIS should benefit from new market opportunities tied to park expansion, new networks, new franchises, new cruise ships, and new consumer concepts (e.g. digital publishing, store redesign, video games, etc.)," he shot out to clients this week. He raised his firm's fair value estimate on DIS to $43.50 from $40 but is still sticking with his NEUTRAL rating because of a concern with slower affiliate fee growth from ESPN, valuation, and macro issues.
Bo Tang, an analyst at Barclays, had already taken down his expectation for DIS last month and DIS's earnings confirmed his thesis. He doesn't see EPS estimates increasing for the rest of the year as longer-term revenues decelerate and ESPN margins get squeezed. "We are reiterating our neutral stance," he said following the earnings release. Needham's Laura Martin is also somewhat cool on the stock, reducing her estimates on FY12 revenues by almost 1% (though she increased operating EPS forecasts by 3.1%).
Nomura's Michael Nathanson sees this quarter's release as a bit noisy due to "timing of cable programming expenses and costs associated with Disney's myriad new park initiatives". He actually raised his target price by $2 to $46 on higher estimates and market multiple. Goldman Sach's Drew Borst also jacked up his estimates going out to 2014 and raised his target price to $44 (from $43) based on a 14.5X estimate of 2012 EPS of $3.03.
Restaurant technology play, OpenTable (OPEN) was certainly open for business this earnings season, delivering solid diner growth, net restaurant additions and better than expected expansion in the UK market. The firm beat Barclays' Mark May's estimates on revs and EPS, turning in $37.2M ($36.8M expected) and $0.37 (versus $0.31). While the stock is up 32% from early January, the analyst thinks there's more room to run. He wrote, "We are increasing our earnings estimates and our 12-month target to $55, largely due to our higher adj. EBITDA estimates (our CY12 adj. EBITDA estimate increases to $68MM from $65MM previously)."
CS analyst Stephen Ju may be satisfied with his dining experience, but he's not happy about the sticker shock. He's lowering his rating on OPEN from Outperform to Neutral based on valuation. He still thinks the long-term thesis is in place — the stock's just gotten ahead of itself.
Well, Groupon (GRPN) celebrated the end of its first quarter as a public company with a sale on its stock (down over 15%). JP Morgan's Bo Nam was expecting pretty good things from the company as investor expectations were real low. Maybe not low enough, though. On the face of it, the quarter was impressive, more than doubling revenues to $506.5 million on the back of new products, strong holiday sales and a rising take from merchants. The daily deal site lost $37 million, though, in the quarter and disappointed analysts who were expecting a profit.
Disappointed, Nam questioned Groupon's current marketing strategy. With 8% Q/Q billings growth showing that growth is decelerating, the analyst suspects "it raises questions about whether the shift from subscriber acquisition marketing to transaction marketing is sustainable over the next few quarters."
In spite of the disappointment, CEO and founder, Andrew Mason said, "We believe we are on the cusp of a sea change in consumer behavior." The company is also dialing down its marketing spend on customer acquisition. Credit Suisse analyst, Spencer Wang sees Groupon's solid results bolstering his firm's constructive view on the name. He was impressed with margins and raised his estimates consequently. He's got a $25 PT on GRPN. Similarly, Barclays analyst Kevin Allen said, "While the company is still relatively young and much execution lies ahead, we continue to view Groupon in the early stages of what could prove to be a long-term growth opportunity in the local commerce and online deals space globally."
Though Apple (AAPL) was enjoying its post earnings glow (the stock's up almost 22% YTD), that doesn't mean the most exciting consumer products company on the planet stayed out of the news. It appears Apple is being sued by Chinese Proview Electronics for $1.6 billion for alleged infringement for use of its trademarked iPad name, according to the Business Insider. Chinese courts have already found in favor of Proview, so this might get interesting. Apple is appealing the decision.
Barclays Capital's Anthony DiClemente was a bit disappointed with Expedia (EXPE). He felt the firm failed to reach the Street's conservative estimates. Gross bookings growth of 10% was in-line, driven by solid hotel room-night growth, but continues to be eclipsed by weakness in Packages, Air, and the Expedia.com brand. Management guided to mid-single-digit earnings growth in 2012, frustrating a Street that expected some more. He lowered his firm's $34 PT to $31 on the news.
Perhaps Thursday's LinkedIn (LNKD) quarterly results portend better job numbers because the business networking company put in a darn good performance. Its enterprise Hiring Solutions division drove the revenue beat with $84.9 million (up 136%), due to new customer acquisition. LNKD's premium subscription business is also growing strongly (up 87% Y/Y). JPMorgan's Doug Anmuth has a $90 target on the stock but cautions investors that there is a lock-up release of 55 million shares held by the top 3 holders in late February.
Barclays also liked results and seem truly impressed by the 105% yoy top line growth. Analyst Mark May has this to say about the future prospects of the stock: "While the valuation is well above average on near-term earnings, so are LinkedIn's growth and long-term margin potential, in our view. We believe LinkedIn can sustain significant growth and achieve margins that are as much as 2x current levels over time, and forecast the company can generate nearly $2 billion in revenue and $500 million in EBITDA by 2014." He's expecting to see $93 within the next 12 months. We may get there soon — the stock is trading up almost 9% premarket ($83).
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