Two Wall Street analysts took dimmer views on some TV stocks according to new reports issued Wednesday.
Michael Nathanson of MoffettNathanson Research lowered earnings estimates for CBS. At the same time Richard Greenfield of BTIG Research downgraded both Discovery Communication and Viacom to neutral from buy.
Nathanson said he was lowering his second-quarter earnings estimate for CBS partly because revenues from subscription VOD deals expected in 2013 now seen arriving in 2014. Nathanson also is lowering his projection for advertising growth at CBS. He says he expects ad sales to be down 4% because of lower ratings, a soft scatter market and the impact of the World Cup. On the local side, Nathanson revised his estimate for revenue growth to 4% from 7%.
Nathan also cut his earnings forecasts for the full years of 2014 and 2015 by 5 cents per share to $3.35 per share and $4.25 per share, respectively.
The weaker ad environment was also a factor in Greenfield’s decision to downgrade Discovery and Viacom. But the key reason was the two companies’ relative lack of live programming. Greenfield said he was focusing his buy recommendations on companies with “must watch now content.”
“Nobody needs to watch whatever is on Discovery Channel or TLC live tonight and certainly not on their phone while on the go,” Greenfield said in his report. “In many respects, we sense Discovery even understands this. We suspect this is the driver of their acquisition push overseas, including sports programming (Eurosport).”
The must-watch factor affected future affiliate revenue growth and their attractiveness in merger and acquisition activity, as well as in the ad market, Greenfield said.
For example he wondered whether Viacom or Discovery will be a part of the new programming package Dish Network will use to target young cord-cutting consumers.
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