Wall Street analysts don’t often come out and recommend that investors sell stock in a company they follow, but Brian Wieser of Pivotal Research Group thinks Discovery Communications shares should drop.
Wieser says that with its stock up about 30% so far this year, Discovery is overvalued. It is providing a lower cash yield than other companies in the sector and its growth is dependent on the same revenue sources and operating conditions.
“We recognize that investors understandably pursue growth and pay a premium for it, especially when the growth is led by what is widely regarded as one of the best management teams in television at Discovery,” Wieser says in a new report. “Investors may continue to favor Discovery for as long as it posts solid operating results. But our view is based on long-term time horizons, which we think the market ultimately reflects in its valuations. When it does so for Discovery, our expectation is that the stock should have some room to fall.”
Discovery shares closed at $85.07 on Friday. Wieser revised his price target for the stock from $73 to $70.
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