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Published: December 23, 2011 at 08:08 PM GMT
Last Updated: December 23, 2011 at 08:08 PM GMT
The Chinese media market looks poised for growth and one player appears to be gearing up for a major expansion. In a strange turn of events, biotech firm AlphaRX (ALRX) announced that the company -- changing tack -- will begin developing a digital media business focused on the Chinese market. "We are very confident that this shift is the right direction to follow. AlphaRx will become a leader in the complex category of digital marketing to Chinese consumers," AlphaRX's CEO Michael Lee said in a recent statement.
While investors clearly cheered Disney's (DIS) announcement that it would massively raise its quarterly dividend, the firm's quarterly results were somewhat perplexing. Nomura's Michael Nathanson seemed to be losing patience with the diversified media firm. While the analyst kept his Buy rating on the firm, he did lower his target price by $1, to $43. Noting a disappointing performance in its digital and studio division, Nathanson "continues to believe DIS' multiple can return to a premium as incremental Park margins recover." Needham's Laura Martin is less optimistic. In a bottom-up financial analysis, she expects DIS's ROIC to be flat at 10.5% in FY12, "one of the lowest performances in our coverage universe."
In a research note to investors, Nomura analysts take aim at the economics of content distribution. Specifically, content distributors have long lamented the rising costs of content acquisition, claiming that they need to pass those costs on to customers. The new research calls this logic into question. The Nomura analysis doesn't find proof of passing along price increases. "In fact, we see evidence that distributors are bidding for more content, not less, to differentiate their bundles," wrote the firm's analysts. "Interestingly, where competition is fiercest, customers have not been forced to pay more for the enhanced content."
Perhaps harbinger things to come, Intel warned its 4th quarter revenue would come in about $1 billion light. The semiconductor firmed blamed the Thai flood for the shortfall. The news spooked already fidgety investors and calls into question the strength of overall demand for PCs.
As high-tech gaming firm Zynga prepared for today's IPO. Media and gaming analysts are already using the mature start-up as a benchmark off of which to measure similar firms. Janney's Tony Wible sees continued domination of social gaming by the Big Three: Zynga, Electronic Arts (ERTS), and Wooga --- together accounting for 75% of total MAU (monthly active users).
Wible sees Zynga's massive public offering (expected to raise more than $1 billion) as providing materiality to some other players in the market. "The deal does suggest GME [which owns Kongregate] and DIS [Playdom] are sitting on material assets," he wrote about the social gaming industry, imploring media investors to take note of one of the fastest-growing media segments.
Wall Street analysts were out initiating coverage on recent IPO, Groupon (GRPN). The e-commerce firm that runs local deals is facing fierce competition from other startups as well as from large incumbent Internet firms like Amazon (AMZN) and Google (GOOG). JPMorgan's Bo Nam likes the local leisure, recreation, and foodservice markets, an opportunity that represents an estimated $5.3TT in sales globally and $1.4T in the U.S.
That said, Nam believes much of that growth opportunity is already baked into the stock and kicked the stock off with a Neutral rating. "We believe this ramp is largely anticipated and its magnitude leaves little room for error in execution and operations at current levels," Nam wrote in JPMorgan's Groupon initiation piece this week.
In fact, Groupon's bankers (who made $40 million on the IPO), have generally liked the stock. 5 out of the 6 underwriters started GRPN off with a buy rating but offered only faint support to buy the shares. The investment banks seemed concerned with the business's low barriers to entry, the nascency of the business model, the move from marketing to profitability, and the voting-structure the firm employs (59% of the voting shares are controlled by insiders).
Barclays, on the other hand, sees some room to run for the stock and initiation with an overweight rating and a 12-month target of $27. "Groupon cracked the code, in our opinion, for how best to leverage the Internet to drive local commerce by introducing an innovative business model that provides merchants a low-risk, high-volume and measureable customer acquisition channel and that provides consumers with very good deal," said Barclay's analyst, Mark May.
Shopping was on many analysts' minds this week as JP Morgan hosted its Holiday eCommerce Trends call, led by comScore's (SCOR) cofounder Gian Fulgoni. The measurement firm forecasts 15% growth this holiday season with top-line sales hitting $38 billion, led by digital content, jewelry and watches, and consumer electronics. Free shipping appears even more critical to driving transactions online. JPMorgan's Doug Anmuth predicts 12.5% growth in eCommerce in 2012, tempered by
As alluded to in last week's report, the NFL scored multiple new broadcast deals this week. The deals, a step-up of about 60% from previous sums, underscore just how popular the professional football games are. Sources close to the deal believe Fox will pay an average of $1.1B per year for its NFC package, CBS is to spend $1B per year for AFC coverage, and NBC $950M per year for its Sunday Night prime-time package and other games.
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