YHOO, TV Nets, NCMI, OMC And More Media Wall Street Reports 5/18/12

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Yahoo

This week on Wall Street actually started last Sunday when word started getting out that Yahoo's (YHOO) new CEO, Scott Thompson, was already on his way out. Investors will remember that certain discrepancies on Thompson's CV began emerging recently. After the CEO departure, EVP and Head of Global Media, Ross Levinsohn was named interim CEO. +1 for activist investor, Dan Loeb, who also scored a seat on YHOO's board.

Credit Suisse's Spencer Wang likes the temporary appointment and BMO's Dan Salmon thinks it sends a positive message to the advertising community. JP Morgan's Doug Anmuth echoes this sentiment in a research piece, but thinks that the management and BOD changes "could delay the potential Alibaba deal, which might be disappointing to certain investors focused on a near-term transaction."

Network TV Upfront

The Upfront season is underway and the process has Nomura analyst, Michael Nathanson scratching his head, wondering why so many people focus on data that has minimal correlation to final advertising results. He's optimistic that 41% of new shows in 2011-2012 made it to their sophomore season, which bodes well for the future of broadcast. "Looking at the full television syndication pipeline for current network programming, it becomes clear that Time Warner and News Corp's pipelines are the most robust, producing some of the strongest unsold shows on television followed by a revival at Disney," he wrote in a research note to investors this week.

CBS

CBS (CBS) appears to be having a strong Upfront season. Laura Martin at Needham Research expects CBS to get a 10% CPM increase for its prime time programming, raising its Prime Time CPM to $27-$29 from $25-$27. She wrote, "In a world and industry inundated by uncertainty, predictability is valuable." CBS renewed 19 shows and replaced only 4 shows. As the Number 1 network, Martin believes this 10% price increase sets a new benchmark for advertising growth in the industry as a whole.

After meeting with management, she expects CBS to sign over $2B in the Prime Time Upfront market. That's about half of the network's total revenues, so if CPMs really rise 10% and ratings are flat, this implies visible revenue growth for 2012 of 5-6%. She's reiterating her BUY rating on CBS with a $40 target.

National Cinemedia

Anthony DiClemente at Barclays was out, updating his model this week on National Cinemedia (NCMI). He's concerned about some of the chatter about a slowdown in the scatter market, citing that some broadcasters are indicating that pricing is tracking "roughly double digits to mid-teens" above upfront levels. He's leaving his EBITDA estimates unchanged ahead of NCMI's first-ever upfront presentation, which was extremely well received by advertisers earlier this week. Barclays has a $17 PT on National Cinemedia.

Tech Sector

With Facebook's monster IPO taking up much of the Street's focus this week, Barclays' analyst, Ben Reitzes found the time for a tech sector update. He and his team introduced the existence of three columns of companies investors should be paying attention to now and into the long term. Not surprisingly, they all riff off of Apple (AAPL), and to a lesser extent, Samsung.

1. Beneficiaries of new product cycles

2. Companies being displaced by new products, cycles

3. "Apple-safe" firms, which include cloud and Big Data plays

"Given the prospect for rapid revenue acceleration into Apple product cycles this year (ranging from Macs to iPads to iPhones), we favor not only Apple but many companies in its supply chain, especially given recent concerns around second-quarter sale," Reitzes wrote in his report on the technology sector.

Omnicom

Anthony DiClemente at Barclays hosted an investor dinner with Omnicom (OMC) management this week. He left the dinner feeling more constructive on the name, especially when it comes to returning capital to investors. According to the analyst, revenues are stable and the firm looks well on-track to hit its target of 13.4% EBITA margins. He's expecting some upside to his buyback estimates based on management commentary. He's Equal Weight on the name and has a price target of $54.

Groupon

Expectations were low when Groupon (GRPN) delivered its quarterly earnings before the market opened on Monday. Groupon easily beat expectations and turned in an awesome quarter, driving the stock up more than 25% this week. Revenues of $559.3 million jumped 14% sequentially, surpassing the forecast of Spencer Wang at Credit Suisse. "Groupon's 1Q12 results validate our constructive view," he sent in an emailed note to investors. Mark May at Barclays reiterated his Outperform rating after the company (in only its second quarter as a public firm) gave surprisingly positive guidance. He believes the company is at the beginning of a long-term opportunity in local commerce. He's got a price target of $27 on the shares.

Amazon.com

Amazon.com (AMZN) got a big, fat upgrade from Credit Suisse's Spencer Wang after he conducted a sum-of-the-parts analysis. Instead of a change in overall economics for Amazon's business, the analyst's work showed that higher fulfillment center costs are being driven by accelerated fulfillment center build-outs and growth in Amazon's fulfillment biz (FBA). He envisions margins stabilizing in 2H12 and go higher from there. He's jacking up his expectations on AMZN stock from $190 to $270.

Millennial Media

Millennial Media (MM) had its first earnings report as a public company this week and it was a good one, beating and raising Kevin Allen's (Barclays) estimates and guidance. Total revenue for the mobile advertising platform hit $33M and EPS came it at ($0.04). He likes the stock, but is only at an Equal Weight with a $17 PT on concerns that growth is already baked in. Investors may have been thinking the same, sending the stock down over 30% this past month but it popped over 12% on Thursday after a Morgan Stanley upgrade.

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