A day after AT&T shares tanked after reducing free cash flow guidance for the year, rival telco Verizon Communications watched its stock near its four-year low on Friday after telling investors it, too, won’t meet its earlier financial targets.

Verizon shares fell as low as $44.38 each, down 7% or $3.28 per share. The decline came after Verizon said in its Q2 earnings release that it would reduce full-year cash flow guidance from 2%-to-3% growth to a 1.5% decline, and earnings per share would be in the range of $5.10 to $5.25 per share instead of earlier targets of $5.40 to $5.55 per share. In addition, Verizon said wireless service revenue would grow 8.5% to 9% for the year, instead of 9% to 10%, while other service revenue should be down 1% to flat, below earlier targets of flat growth.

The guidance reduction comes after AT&T said on Thursday it would miss its previous full year free cash flow target, sending its stock down as much as 10% for the day. Shares closed July 21 down about 7%, and fell another 3% on Friday.

The missed guidance for Verizon compounded what was a disappointing quarter for the telco. Verizon added 268,000 broadband customers, 256,000 of which were fixed wireless subscribers. Fios additions at 36,000 for the period were below some analysts estimates of 45,000 additions. But the company also reported it lost 215,000 postpaid wireless customers in the period, more than four times some analysts estimates of a loss of 60,000 customers. In a research note Friday, Barclays Group media and telecom analyst Kannan Venkateshwar, who earlier in the day lowered his rating on AT&T to “equal weight” from “overweight” and reduced his price target on the stock to $20 per share, said Verizon’s wireless performance could potentially make the first half of 2022 its worst ever.

“More importantly, there isn’t an easy path to turning this around given the company’s market positioning as the highest priced provider in a saturated market with growing low-priced competition and increasingly challenged macro backdrop,” Venkateshwar wrote. “Not surprisingly, the company announced a lower priced entry tier recently but this may merely turn out to be a tool to offset elevated churn due to recent price increases across the entire base, the impact of which is likely to be seen in 3Q.” ■

AT&T shares continued their slide on Friday after Barclays Group media and telecom analyst Kannan Venkateshwar lowered his rating on the stock, claiming that management’s decision to reduce free cash flow guidance could call the company’s credibility into question.

AT&T shares fell for the second day in a row, dipping as low as $18.30 per share, down 3.3% or 62 cents each. In the past three weeks the stock has fallen about 13% from $21.03 on July 1. 

AT&T said on Thursday that it expected to report full year free cash flow guidance of about $14 billion, instead of the $16 billion it had previously predicted, mainly due to heavier investment for growth. But Venkateshwar, in a research note Friday, wasn’t buying it.

The analyst, who lowered his rating on the shares from “overweight” to “equal weight,” pointed to the fact that AT&T’s full-year mobility EBITDA growth guidance hadn’t changed despite higher and unit pricing growth and an increase in service revenue growth guidance of between $700 million and $800 million for the year. In addition, Venkateshwar wrote that forward commentary regarding 2023 cash flow was “squishy” and could make visibility worse if the economy were thrown into a recession. 

“This backdrop isn't helpful when the biggest pushback against AT&T has been execution credibility and now the company has cut guidance within 4 months of giving it,” Venkateshwar wrote. “Overall therefore, after a couple of years of trying to change the narrative, AT&T seems to be back in the same place that it started with respect to concerns about its dividend sustainability and management credibility.” ■

 A day after expressing at least some optimism that Altice USA, after a disappointing Q4, might have a little gas left in the tank to drive its way out of its most recent hole, influential media analyst Craig Moffett has changed course on the stock, downgrading his outlook to “neutral,” and slashing his 12-month price target on shares to $15 from $33 previously.

Altice USA stock fell more than 20% and hit a new 52-week low on Thursday — $11.12 per share — before closing at $11.83 down 17.8%. With Wednesday’s falloff, the shares are down nearly 27% since the beginning of the year. 

The company lost about 2,000 broadband subscribers in Q4 — and shed 3,000 for the year — slightly better than analysts’ consensus expectations and spurring some optimism that it could have been worse. Altice CEO Dexter Goei also outlined a plan to accelerate its fiber buildout and reverse the downward trend.  Many analysts took the bait, and Moffett wrote Wednesday that Altice USA could probably be fixed, but it wouldn’t be easy and it would take some time. By Friday morning, after the stock cratered, his attitude changed.

Moffett isn’t the only analyst to downgrade the stock, but his mea culpa comes at a time when the cable sector itself is under pressure from slowing growth in broadband and rising competition from streaming video and telco companies.  

Also: Altice USA Streaming-Obsessed, Broadband-Only Customers Are Averaging More Than Half  a Terabyte of Usage Each Month 

“Wrong. Wrong story. Wrong time. Wrong call (on our part) to have stuck around too long,” Moffett wrote Friday. “Just … wrong. There’s a time for highly levered fix-it stories. This isn’t that time.”

Altice shares were down about 2% in pre-market trading Friday to $11.59 each. 

In his Thursday note, Moffett wrote that Altice has been in a similar situation in a previous life as Cablevision Systems, in 2013. At that time, the company was faced with industry-leading customer penetration rates for its service, which made growth difficult. While the rest of the market thought Cablevision was on its last legs, -- including Moffett — Altice swooped in and paid top dollar for the asset, claiming it could right the ship with a more stringent cost structure. That worked for a while, but now, the company is faced with a familiar dilemma. 

“Altice is now entering what is likely to be a multiyear ‘fix-it’ phase,” Moffett wrote. “At a time of rising interest rates and falling risk appetites, a company with badly battered near-term growth prospects, and with a higher warranted WACC [Weighted Average Cost of Capital], Altice USA looks far less compelling than it had. We grossly overestimated the market’s willingness to underwrite their turnaround.”

Also: Broadband Slowdown Forces Analyst to Go Negative on Cable Sector 

Moffett still believes that Altice USA can be fixed -- he was especially hopeful about Suddenlink’s prospects -- but he noted it’s probably going to take longer than most thought. Where he was most wrong, he added, is in expecting the market to ignore the near-term challenges and look toward longer-term growth.

“Without a catalyst — such as a take-private that we once viewed as a reason to own the stock (that didn’t work out so well) — we have much lower expectations for a near term rebound to what we still believe is a materially higher warranted value,” Moffett wrote. 

He’s now forecasting that Altice will have no real broadband growth in 2022 (about 9,000 new customers), and will add 34,000 high-speed data customers in 2023.He doesn’t expect growth to approach 219 levels (75,000 additions) until 2025 (72,000). 

“Their steps to expand their footprint through edge-outs and, where available, government deployment subsidies, are welcome,” Moffett wrote. “But they will take time. We project no real broadband unit growth for 2022, and only modest growth in 2023.”  ■ 

Altice USA shares fell more than 20% on Thursday, hitting a new 52-week low of $11.26 per share in early trading on February 17, as investors were spooked by disappointing Q4 broadband subscriber results and expected hikes in capital expenditures to finance an accelerated fiber network build. 

Altice USA said after market close on Wednesday that it lost about 2,000 broadband subscribers in Q4 and shed 3,000 for the year, results that shouldn’t have come as much of a surprise to investors -- management has been hinting at possible losses for months. But coupled with plans to accelerate its fiber network buildout to cover 6.5 million homes by 2025, and the expected hike in capex that would go hand in hand with that plan, investors decided they had had enough. 

Altice stock was down nearly 22% ($3.14 per share) to $11.26 each on Thursday morning, shattering its previous 52-week nadir of $12.87 per share. The shares closed February 17 at $11.83 each, down $2.57 each or 18%. 

Also: Analyst Makes Case for Altice USA to Go Private 

In a research note, MoffettNathanson senior analyst Craig Moffett wrote that Altice’s Q4 results offered few surprises, but that the bigger picture looks bleak. According to Moffett, Altice isn’t growing broadband subscribers, ARPU for the segment was down sequentially for the first time, wireless growth is well below peers, margins are under pressure, the company went against its past history by declining to provide guidance for the future, and they stopped buying back their own shares. 

“Altice investors will have to decide whether these trends can be turned around with higher footprint growth and faster fiber investment,” Moffett wrote. “And Cable investors more broadly will need to decide whether these trends are unique to Altice or a broader harbinger of things to come.”

He added that he believes that Altice’s problems can be fixed and appear to be unique to the company, but it won’t be easy. 

Altice said Wednesday that it would accelerate the fiber buildout to 6.5 million homes by 2025, a goal that Wells Fargo Securities media analyst Steven Cahall said represents about 65% of Altice’s footprint, adding that currently fiber reaches only about 13% of its homes passed.  

Also: Did Altice USA Cut Costs Too Much? 

The company said in Q3 that it will spend about $1.7 billion to $1.8 billion in capex in 2022, up from $1.2 billion in 2021. That represents about 18% of revenue at a time when peers like Comcast and Charter are extending their networks but keeping capital intensity low at 11% and 14.1%, respectively. 

“Now, Altice’s elevated capex may reflect too many years of under-investment in favor of cash deployment to shareholders, but it's nonetheless looking at competitive intensity today and choosing to skip DOCSIS 4.0 entirely and jump right into fiber,” Cahall wrote, adding that investors should wonder if the rest of the cable industry will need to do the same. 

In a research note Thursday, Barclays Group media analyst Kannan Venkateshwar wrote that while the rest of the cable industry is experiencing a slowdown in broadband subscriber growth, Altice is the only major operator showing negative growth metrics. Adding to the concern is that past efforts to return value to shareholders via leveraged share buybacks has driven up its debt-to-cash flow ratio to 5.4 times, giving it little wiggle room “to deal with competitive or idiosyncratic factors.”

“Just a couple of storms or a bit more competition in the company’s footprint could make the balance sheet a much bigger focus than it already is,” Venkateshwar continued. “Therefore, it is likely to be tough to change the narrative on the stock anytime soon unless the company turns around subscriber performance.”

It appears that Altice is convinced that building more fiber, offering higher speeds and better quality will be enough to get the broadband growth engine back on track. In a conference call with analysts to discuss Q4 results, Altice USA CEO Dexter Goei said that most of the broadband losses were in areas where it competed against Verizon Fios, and that the company was beginning to see improvement in those markets in Q4. 

On the call, Goei said Verizon Fios wasn’t being as “hypercompetitive” as it was during most of 2021 and has raised its pricing on data.  

Prior to February 17, Altice shares were down about 11% for the year, and Goei said management is focused on beefing up the stock price, adding it is a big reason for doubling down on the fiber build. 

“Because it is clear in our minds that investing in the infrastructure and upgrading it significantly is going to drive a tremendous amount of value and growth for this business,” Goei said, adding that success will be determined by how well the company is able to execute that plan.  

“We just have to continue to execute here and this is a big year of execution,” he continued. “We feel good about our initiatives that we started in the second half of last year. And we feel good about 2022 in terms of executing our operational goals."

Moffett added that while longer term guidance for lower capital intensity and higher margins could be more reassuring to some investors, more important is what will happen over the next year.

“Unfortunately, the near term outlook is cloudy at best,” Moffett wrote.

But the analyst continued that Altice has been down this road before, in its previous life as Cablevision Systems. Back in 2013, Cablevision was considered to be on its last legs, with most of its value already depleted and its industry-leading service penetration rates making the growth prospects grim. But when Altice bought Cablevision in 2016, it showed that by fixing its cost structure, there was more gold to be mined, extending its growth runway by pairing it with an asset Altice had purchased just months before -- Suddenlink Communications.

And though Suddenlink seems to be showing signs of difficulty, Moffett believes they are mostly self-inflicted. And though the fiber buildout and implementing a more rational cost structure isn’t exactly new -- Comcast and Charter are making similar moves --  it probably is the best path to follow. 

“They are on their way to becoming a more conventional cable company, albeit one with an FTTH strategy rather than a DOCSIS based strategy,” Moffett wrote. “We’ll never love the legacy Cablevision footprint, but the blended asset mix at Altice is still capable of growing, even if at a slower pace than peers.” ■

Netflix stock continued to claw back from the hole it dug itself in the wake of disappointing Q4 results, rising more than 10% on Monday after it was revealed over the weekend that chairman and co-CEO Reed Hastings purchased $20 million worth of company shares.

Hastings purchased more than 50,000 shares of Netflix stock at an average price of $388 each on January 27 and 28, according to a filing with the Securities and Exchange Commission, increasing his personal holdings in the company to 5.16 million shares. 

Hastings’ purchases came on the heels of hedge fund legend William Ackman’s disclosure that his Pershing Square Capital Management purchased about $1 billion in Netflix stock on January 21, which sent the stock up 7.5% on January 27. 

Hastings’ purchases are seen as a vote of confidence in the stock, especially after Netflix missed subscriber growth targets in Q4 and issued Q1 guidance that some investors interpreted as a sign that streaming video was losing favor with consumers.

Netflix shares were priced as high as $427.69 each on January 31, up 11.3% ($43.33 per share), before closing at $427.14 up 11.1%. Since January 25, when the stock closed at  $366.42 -- down 28% from its January 21 close -- the stock has regained about half of those losses.  

Also: Netflix Bulls No More

Netflix isn’t the only streaming stock that has been battered after reporting disappointing results -- Disney and ViacomCBS stocks are both down significantly since reporting sluggish growth in their direct-to-consumer products in November -- and it won’t be the last. But as some investors see the slowdown as a signal to jump ship, others see opportunity. 

In a research note, Wells Fargo Securities media analyst Steven Cahall wrote that he has seen an increase in Netflix interest after the so-called “Streaming Meltdown” from growth-at-a-reasonable-price (GARP) investors, adding that there is some debate as to whether the expected slowdown in Netflix subscriber growth will be as dramatic as the company has indicated. 

“The conspiracy theorists believe this is part of management looking to shatter the annual expectation for 25-30 million net adds, and redirect attention to overall financial growth,” Cahall wrote. “No one has much of a handle on what the new rate of sub growth will be, though there's general agreement that EPS growth will remain firmly in the mid-20%s. With Netflix [Calendar Year] 2023 P/E [ratio] of 24x, this seems like a GARPy opportunity.”  ■ 

Netflix stock fell as much as 25% on Friday after the SVOD pioneer slightly missed subscriber growth targets in Q4 and issued weak guidance for the future, forcing some analysts to rethink their prior bullish stance on the stock.

Netflix shares were trading as low as $380 each on Friday morning, down 25% or $128.25 per share. The stock closed at $397.50, down 21% for the day.

Other streaming-heavy stocks fell as well. The Walt Disney Co., whose own Disney Plus service has shown some signs of slowing subscriber growth, was down 7% to $137.41, while Discovery Inc., which launched Discovery Plus last year and is in the process of merging with HBO Max parent WarnerMedia, fell 4.7% to $26.19 per share. ViacomCBS, whose Paramount Plus service was revamped last year, fell 7.4% to $31.25 each.

While the Q4 subscriber miss had a lot to do with Netflix’s decline -- it added 8.3 million new customers in the quarter, slightly below consensus estimates of 8.5 million additions -- the real damage came in its guidance for Q1. Netflix estimated that it would add about 2.5 million new customers in Q1, its lowest growth in years and particularly surprising given the first quarter’s influence on the rest of the year. Since 2017, Q1 additions have represented an average of 29% of total full year subscriber additions, according to MoffettNathanson media analyst Michael Nathanson. Using that average, Netflix could add as little as 8.5 million new subscribers in 2022. In contrast, it added 18.2 million new customers in 2021 and 36 million in 2020.

Also: Has Nielsen Been Shortchanging Netflix on Streaming Metrics? 

Adding to the concern is that Netflix had some of its most-viewed content in the past year -- Red Notice and Squid Game. If content like that wasn’t enough to drive subscriptions, what will?   

It wasn’t too long ago that a lot of analysts considered Netflix bulletproof, consistently adding subscribers and expanding its reach to the rest of the world on its way toward 300 million global subscribers by 2023. While domestic customer growth appeared to begin to level off in recent years -- Netflix has about 75 million customers in the U.S. and Canada -- international markets were expected to more than take up the slack.

But in Q4, the opposite appeared to happen. Domestic growth at 1.2 million new paying customers was nearly five times consensus estimates of 250,000 additions. Europe and the Middle East also outperformed -- 3.5 million additions versus 3.3 million consensus -- while Latin America and Asia underperformed severely. Analysts had expected Netflix to add about 1.2 million new customers in Latin America -- it added 925,000 -- and 4.1 million in Asia -- it added 2.6 million. 

That sent a signal to analysts that what was thought to be an unstoppable streaming juggernaut had an Achilles heel, and sent them to their excel spreadsheets to recalculate the future.

Barclays media analyst Kannan Venkateshwar, Morgan Stanley media analyst Ben Swinburne, Evercore ISI Group media pundit Mark Mahaney and Macquarie media analyst Tim Nollen all reduced their overall ratings and slashed their 12-month price targets on Netflix stock. Other analysts like Nathanson and Wells Fargo’s Steven Cahall maintained their overall ratings on Netflix, but slashed their price targets.

Nathanson kept his “neutral” rating on the company but cut his 12-month price target by $85 to $375 per share. Cahall maintained his “overweight” rating on the shares, slashing his price target by $200 to $600 per share and adding in a note to clients that the Q1 guidance “has investors rethinking the growth path.” 

Venkateshwar, who has been bullish on Netflix in the past, reduced his rating to “Equal Weight” and wondered if the slowdown expected in Q1 is a longer-term phenomenon. 

In his research note, Venkateshwar wrote that Netflix’s Q1 guidance “plays almost perfectly into the bear thesis” for the stock, as it will be its lowest growth target ever. And because Q1 usually is a big part of overall annual growth, the analyst speculated that the lower guidance could mean that 2022 will be significantly lower than 2021.

“Both the Q1 guide  and ’22 margins were among investor concerns going into earnings and seem to have been validated based on guidance,” Venkateshwar wrote. “Overall therefore, based on company guidance, 2022 is effectively shaping up to be the company's slowest year of growth on most KPIs.” 

Swinburne dropped his rating on the stock from “Overweight” to “Equal Weight,” and slashed his price target to $450 from $700 per share, adding that he expects content spend to continue to rise as subscriber additions slow. 

Macquarie’s Nollen dropped his rating on Netflix to “underperform” from “neutral” and slashed his price target to $395 per share, adding that he was concerned about increased competition and how that could eat into the SVOD giant’s  international growth. 

“Competition is intensifying, especially internationally,” Nollen wrote “This is becoming a bigger problem now: for example a combined Discovery/Warner this year brings strong brand recognition to many countries, with lower-priced ad-supported tiers, while other players like Paramount [Plus] and NBCU are joining forces in Europe on distribution.”

At Evercore ISI, Mahaney dropped his rating on the shares from “outperform” to “in line,” reducing his 12-month price target from $710 to $525 per share. In a research note, Mahaney said that while there are many excuses for the Q4 miss and lower Q1 guidance -- including heightened near-term churn due to an expected U.S. price increase, increased competition, market maturity, the ongoing pandemic and the late Q1 release of key content like Bridgerton -- the “negative inflection implied by the Q1 guidance is significant.”

Mahaney dropped his full year 2022 subscriber growth estimates by nearly 40% to under 17 million new customers from 26 million previously. 

While Mahaney said this could be a one-off and Netflix could recover its subscriber mojo, he noted it also could be a sign of Netflix’s maturation in key markets. And though he wrote that he has been a consistent buyer during other ebbs and flows at the company -- this isn’t the first time it has missed quarter subscriber targets -- he believes this time may be different. 

In his note, he said the reason for the downgrade was twofold -- the Q1 guidance “implies a real, surprising negative inflection point in the company’s growth outlook;” and the shift changes his growth equation for the company from one based on unit and subscriber growth to one based on price and average revenue per customer, “which makes it less attractive/sustainable.” ■

Altice USA shares fell another 10% Friday as investors continued to rush for the exits after CEO Dexter Goei said the company would have to increase spending as Q3 broadband additions enter negative territory, causing some to call into question the company’s past aggressive cost-cutting strategy. 

Altice USA shares traded as low as $19.74 each on Friday morning (down 10.5%, or $2.32 per share), after a 12.7% decline on Thursday when Goei said at the virtual Goldman Sachs Communacopia conference that the company would lose between 15,000 and 20,000 broadband customers in the third quarter. The stock closed at $20.59 each on Sept. 24, down 6.7%, or $1.47 per share.  

“If perchance Altice USA CEO Dexter Goei MEANT to destroy his own stock yesterday, he could hardly have been more thorough,” wrote Bernstein media analyst Peter Supino in a note to clients Friday. “After stating that Altice would miss consensus broadband net additions for the third time in four quarters, Goei described a different operating and financial trajectory with less broadband ARPU growth, more operating expenses, more capital expenditure, and less share repurchase (maybe, probably, for now). This may have been the most thoroughly negative outlook we have ever heard.”

While operators have repeatedly warned that the COVID-fueled growth rates of 2020 will slow down in 2021, Goei’s comments hurt all the more because not only did they highlight that broadband performance not only could slow down but could turn negative, and that capital spending, on the decline as the focus of the cable business has shifted toward broadband, could rise. 

Also Read: Analysts Search for Meaning in Altice USA Leadership Change 

Goei didn’t say how much he expected expenditures to increase at the Goldman conference. Altice USA also is in a different situation than other operators because it is in the middle of a five-year fiber upgrade plan started in 2017. Already the company expects to pass about 1.5 million homes in its footprint with fiber by the end of the year, mostly in areas where it competes with Verizon’s Fios service. Whether it will extend that buildout to its renaming 1.5 million homes in the future remains to be seen. 

“Ultimately, we do believe that fiber is the technology, the winning technology going forward as opposed to improvements in DOCSIS technology," Goei said at the Communacopia conference, but he added that it is getting harder to find technicians that know how to build fiber networks.    

In a research note, Barclays media analyst Kannan Venkateshwar wrote that he believes Altice USA’s problems go beyond infrastructure. 

“We believe costs may have been cut too deeply in areas such as customer support and billing, which may need to be built back to match the footprint expansion,” the analyst wrote. “This is why the turnaround in operations may take a while to materialize.”

As far as its stock, Venkateshwar noted that Goei also said the company will slow its share repurchase program, a key component of its valuation. He added that Altice USA’s track record for multiple guidance cuts in the past two years and its inability to meet its short-term goals have threatened its credibility, which has also pressured the stock.

“Overall, we believe Altice USA is back to where it was at the time of its IPO with respect to gaining investor confidence,” he wrote. “It took management a couple of years of execution to gain investor attention post IPO, and in many ways, the company appears to be back in that cycle. Consequently, we do not see any good reason to recommend the stock.” 

Altice USA burst on the U.S. cable scene about six years ago, when it’s former parent Altice NV purchased Suddenlink Communications and Cablevision Systems in quick succession. Led by then chairman Patrick Drahi, an admirer of US cable legend John Malone, Altice USA believed it could squeeze profit out of what many said was a rapidly maturing industry by slashing expenses and imposing European-style cost discipline to the bloated U.S. cable business. 

While most analysts doubted that ability, Altice made good on that promise by removing $900 million in costs from its former Cablevision and Suddenlink businesses, later going public in 2017. But now, with its stock price falling sharply — it reached a new 52-week low Friday — some analysts are wondering if the company may be better off increasing its leverage to buy its remaining publicly traded shares, effectively abandoning the public markets altogether. 

At the Communacopia conference, Goei said that beefing up leverage is an option, but at least for the next three quarters, the focus will be on righting the ship. 

“We’ve got decisions whether we want to releverage the balance sheet at some point in time if we’re not getting rewarded for what we’re doing from an investments perspective, that we really believe in the medium-term results,” Goei said. “But I don't think that's a decision for us to make today.

“I think we’re focused, given the management changes, on making sure that all arrows are pointing in the right direction towards reinvesting in our business or accelerating our business, and that's what the focus is going to be over the next three quarters,” he continued. “Thereafter we can have discussions around what to do with our balance sheet, depending on how the market sees us.”

Also Read: Model Behavior

Goei said in part the Q3 loss was due to lower than expected gross adds and an “underwhelming”  back-to-school period And while some analysts noted the inherent seasonality of Q2 and Q3 in the cable business — typically that’s when customers move to summer homes and college students go off to school -- others weren’t buying it. 

“Explanations proffered by operators thus far for lower gross adds don’t really make much sense to us, especially given that telecom companies are actually seeing trends improve,” Venkateshwar wrote. “While some have blamed weaker back-to-school origination, most colleges in the U.S. are operating at close to full capacity and therefore it is not clear where this slowdown is coming from.”

Venkateshwar warned that “there are more shoes to drop,” pointing to eviction moratoriums expiring, fading unemployment insurance increases and the potential fallout from non-pay churn.

“[T]here is an unusual lack of visibility across cable industry unit growth trends, and given the fact that almost the entire residential revenue topline growth now depends on broadband relationships and the high proportion of fixed costs on the broadband side, valuation in the space could have more downside to reflect this uncertainty,” Venkateshwar wrote. 

ViacomCBS shares continued to take a beating on Thursday, down as much as 8% in early trading as MoffettNathanson media analyst Michael Nathanson slapped a “sell” rating on the stock.

ViacomCBS shares are down about 35% in the past three days,  as the streaming frenzy that lifted its shares by more than 100% in the past three months seems to have reversed. ViacomCBS shares were trading at more than $100 each as recently as March 22, but the bottom seemed to fall out of the stock after the company priced a $3 billion stock offering aimed in part to raise money for its streaming efforts.

The offering was praised -- if half-heartedly -- by most analysts, who saw the issuance as a way for ViacomCBS to take advantage of its rising stock price. Prior to announcing the deal on March 23, ViacomCBS shares had risen 170% since Dec. 31. Even with the sharp declines of the past few days, the stock is still up 74% for the year.

ViacomCBS shares were priced as low as $64.52 each on March 25, down 8%, or $5.58 per share. The stock closed at $66.35, down 5.4%, or $3.75 per share, on Thursday. 

But analysts had worried about the multiples assigned to the stock -- and to another streaming programmer Discovery Inc., which has seen a less sharp decline (20%) over the past two days. In several reports, analysts questioned the logic of valuing ViacomCBS and Discovery shares at more than 20 times earnings, compared to Google, a vastly larger company, which trades at 16 times.

Also Read: Islands in the Streams 

On Thursday, Nathanson lowered his rating on ViacomCBS from “neutral” to “sell” and his 12-month price target on the stock from $67 each to $55 per share. In his note to clients he added that programmers that are shifting programming that once resided on their linear channels to streaming, run the risk of rapidly accelerating cord cutting. He pointed specifically to ViacomCBS and Comcast’s NBCUniversal, which will stream NFL games on their respective Paramount Plus and Peacock services simultaneously with their broadcast networks, beginning in 2023.

“In particular, those programmers -- again ViacomCBS and NBCU -- who appear to abandon their linear programming obligations by rapidly shifting premium content over to their DTC platforms run the risk of getting dropped by MVPDs and/or suffering lower annual price escalators, especially as it related to growth in retrans,” Nathanson wrote.

Nathanson added that smaller networks that don’t attract as high affiliate fees for their linear channels -- like AMC Networks and Discovery -- would gain from a shift to a direct-to-consumer model. In his report he estimated that Discovery receives about $6 per subscriber per month in linear network affiliate fees and $7 per month per customer for its Discovery Plus streaming service. AMC Networks, he estimated, receives about $2 per subscriber per month for its linear channels and $4 per month for its AMC Premiere streaming product.

But the exchange is different for ViacomCBS. According to Nathanson, ViacomCBS receives about $12 per subscriber per month for its linear channels line MTV, Comedy Central and Nickelodeon, and just $6 for Paramount Plus and $2 for its mostly ad-supported Pluto TV streaming offering. For companies that already get a healthy amount of revenue from traditional network affiliate fees, a sudden collapse in pay TV subscribers could be devastating.

Nathanson added that he sees similar difficulties for Fox, Turner and NBCU as more and more pay TV customers cut the traditional TV cord. The analyst already is predicting that traditional pay TV will lose about 15 million subscribers to cord cutters by 2024. But if those losses accelerate to 25 million, Nathanson estimates it would result in single-digit advertising and affiliate fee revenue declines for Disney’s and AMC Networks’ respective linear and streaming offerings, and double-digit losses for ViacomCBS, NBCU, Fox and Turner.

“This is especially true for ViacomCBS without a clear positive pivot in either the U.S. or internationally,” Nathanson wrote. “While we have increased worries about pressure on the company’s linear affiliate fee negotiations post the NFL announcement, we see a tough economic trade of shifting linear revenues to DTC, even before we factor in the lonely lower margin profile.” 

ViacomCBS shares fell more than 23% ($21.25 each) in early trading Wednesday after the programmer priced a new stock offering to raise $3 billion for its streaming efforts well below its previous day’s price.

ViacomCBS stock fell as low as $70 per share March 24, down 23.3% or $21.25 each. The stock closed at $70.10 (down 23%) on Wednesday. 

It was the second day of declines for the stock. ViacomCBS shares fell 9% ($9.09 each) on Tuesday, closing at $91.25 per share. 

The programmer said March 22 that it would raise $3 billion for general corporate purposes and its streaming efforts through two offerings -- $2 billion in Class B stock and $1 billion in 5.75% Series A Mandatory Convertible Preferred stock -- which was praised by most analysts given the ascent of the shares since the company launched its Paramount Plus streaming service. ViacomCBS stock has more than doubled this year from $37.16 each on Dec. 31 to $91.25 per share on March 23. 

On Wednesday the programmer said it would offer 20 million shares of Class B stock at $85 per share and 10 million shares of the preferred stock at $100 each, which apparently forced some investors to take profits. 

Also Read: Islands in the Streams 

Several analysts have warned in the past that ViacomCBS shares were overvalued, caught up in the frenzy over streaming video.  In a research note Tuesday, Bernstein media analyst Todd Juenger, who has said for months that the shares were overvalued, wrote that as long as they didn’t intend to set the proceeds from the offering on fire, it was a good move for Viacom. But he warned it could backfire.

“We haven't encountered any professional investors defending upside in the stock, since it was trading at about $25,” Juenger wrote. “If it's mostly algorithms and retail investors trading the stock at this level, neither of those ‘buyers’ are eligible to get an allocation.

“Additionally, as admirable as it is for a company to issue shares, essentially admitting they are fully valued (if not overvalued), it could trigger more shareholders to take profits,” Juenger continued. “If the momentum reverses, plus equity dilution, the algorithms may finally stop liking this stock, too.”

CuriosityStream said it finished the year with 15 million subscribers, up 50% from 2019, as full year revenue at the factual streaming service more than doubled to $39.6 million. 

Fourth quarter revenue at CuriosityStream was $11.4 million, compared to $6.7 million in the prior year. Net loss was slightly higher at $15.7 million in the period, compared to a loss of $14.6 million in the prior year. 

CuriosityStream went public in October after being purchased by special purpose acquisitions company (SPAC) Software Acquisition Corp. in a deal that valued the streaming service at about $331 million. Its stock, traded under the symbol “CURI,” closed at $16.47 each on March 23, down 60 cents each or 3.5%. Shares were up by 11 cents each in after-hours trading to $16.58.

Also Read: CuriosityStream Looks Ahead 

Full year revenue more than doubled from $18 million to $39.6 million, while the net loss for the year improved to $38.6 million, compared to a loss of $42.5 million in 2019. The company said it expects 2021 revenue to rise by about 80% to at least $71 million. 

“We had a strong 2020, ending the year with more than double our 2019 revenue with approximately 15 million subscribers,” CEO Clint Stinchcomb said in a press release. “More recently, we raised approximately $100 million in a follow-on offering completed in February of this year. We enter 2021 with a strong balance sheet, one of the largest libraries of factual content in the world and a world-class team of experienced media executives executing strongly against our plans. I couldn’t be prouder of what we accomplished in 2020, and I look forward to 2021.”

Discovery stock was down more than 8% Tuesday after UBS Securities analyst John Hodulik lowered his rating on the shares to “sell” from “neutral,” adding in a research note that gains from the programmer’s streaming services Discovery plus were already baked into the stock.

Discovery shares have been on a run in the past few months, more than doubling from $30.09 on Dec. 31 to $74.65 each on March 22, fueled by the Jan. 4  launch of Discovery Plus. The company said it had about 11 million streaming customers in February well above analyst expectations.

Discovery shares were as low as $68.41 -- down 8.4% or $6.24 per share -- in early trading March 23. The stock closed at $71.68 each on March 23, down 4% or $2,97 per share. 

“While discovery+ appears off to a strong start, we remain concerned regarding the ultimate scalability of the service in relation to the decline of the linear business and longer term impact on financials,” Hodulik wrote.

Also Read: Islands in the Streams 

In his note, Hodulik increased his 12-month target on the stock to $46 from $20 each, but warned that cash flow and free cash flow growth would be “flattish” with “moderating growth exiting '21 as cord cutting picks up and early DTC tailwinds fade."

Hodulik was also cautious about the multiple the market has applied to Discovery shares -- more than 20 times free cash flow and 15 times EBITDA -- something that other analysts have also worried about. His new price target is based on a 10 times EBITDA and 14 times free cash flow model. 

The UBS analyst expects Discovery plus to reach 8 million subscribers in the U.S. and 23 million globally in 2021.       

Shaw Communications stock began to slip March 18, down nearly 2% in midday trading, as reports began to mount that the Canadian telecom company’s planned $20 billion merger with Rogers Communications could get some regulatory pushback. 

Rogers said March 15 that it had agreed to purchase Shaw in a cash and assumed debt deal worth about $20 billion. The transaction, which valued Shaw shares at C$40.50 ($32.55), was approved by both companies’ boards of directors and was expected to be completed in the first half of 2022. 

Shaw’s stock immediately rose after news broke -- it went as high as $28.05 on March 15, a 46.5% increase from its March 12 close -- but the stock was still far off from Rogers’ offering price. That the stock peaked at $28.17 per share on March 16 (13% below the offering price), and that gap continues to widen -- Shaw stock traded as low as $27.54 per share on March 18 before closing at $27.55, down 1.7% -- has caused some analysts to wonder whether the deal will face some harsh scrutiny. 

Also Read: Altice USA to Buy Morris Broadband for $310 Million

The deal will be reviewed by three Canadian regulatory agencies -- the independent Competition Bureau of Canada, the Canadian Radio-television and Telecommunications Commission, and the Department of Innovation, Science and Economic Development. According to reports throughout the Canadian press, the main issue appears to be the removal of a fourth wireless carrier -- a sticking point with Canadian regulators -- and even Rogers’ promises to keep prices level for Shaw’s Freedom Mobile plan for three years and boost deployment of 5G may not be enough.

Rogers has pledged to invest C$2.5 billion ($2 billion) in 5G networks across Western Canada, creating up to 3,000 new jobs. In addition, Rogers promised to create a  C$1 billion ($800 million) fund dedicated to connecting rural, remote and Indigenous communities to high-speed internet across the four Western provinces and spend another C$3 billion ($2.4 billion) to support additional network, services and technology investments 

While the regulatory agencies have pledged to scrutinize the deal, some Canadian politicians have expressed doubt about the benefits of the merger.

“Big telecom companies are gouging Canadians and continuing to make massive profits in a time where most families are struggling to get by. A merger between two of Canada’s biggest providers will just make it worse,” New Democratic Party leader Jagmeet Singh said in a statement after the deal was announced.  

On the conservative side, MP Pierre Poilievre, the Conservative Shadow Minister for Jobs and Industry, called for hearings into the proposed deal. 

“Some argue the Rogers-Shaw deal means more investment, others that it means less competition,” Poilievre said in a statement. “The only way to know for sure [is] through careful and intense debate. Conservatives want the Industry Committee to hear from customers, workers, business leaders, engineers, economists and other experts to get a complete understanding of the proposed deal.”

Poilievre added that the deal, which would create a C$50 billion telecom powerhouse with C$20 billion in annual revenue, 33,000 employees and about 13 million wireless customers, would be important in any era, but is especially critical during the COVID-19 pandemic, which has forced many Canadians to work from home. 

“If some communities cannot get fast, affordable connections, their people will be left behind.” he continued. “Conversely, fast, affordable wireless combined with remote work could revive struggling rural, remote and indigenous economies like we have not seen since the urbanization phenomenon began. For it to happen, we can no longer accept poor internet at high prices.”   

Canadians pay some of the highest cell phone bills in the world. According to a report by Finnish telecom research company Rewheel, the Big Three Canadian wireless service providers -- Bell, Telus and Rogers -- had the least competitive rates globally. Other reports have compared Canadian wireless rates between 15% and 40% higher than in the U.S. 

It has become such an issue that reducing Canadian wireless bills was a key part of Prime Minister Justin Trudeau's 2019 reelection platform. In March, Trudeau made good on that promise, requiring telecom operators in the country to reduce their charges by 25% over the next two years.

Shares of Shaw Communications rose more than 40% on the Toronto Stock Exchange Monday in the wake of its $20 billion purchase by Rogers Communications, but the stock price was still well below Rogers’ offer as questions persist around the deal’s potential impact on wireless competition in Canada. 

Shaw shares closed at C$33.85 each on the Toronto Exchange March 15, up 41% or C$9.95 each while Rogers stock rose 3.4% (C$2.02 each) to C$61.57 per share. Both stocks are also traded on the New York Stock Exchange, and saw similar gains. Shaw was up 41% ($7.93) to $27.10 per share on the NYSE, while Rogers increased 3.5% ($1.69) to $49.42 each.     

Rogers agreed to purchase Shaw for C$40.50 ($32.40) per share (about $16 billion in total) in cash, a 70% premium to its March 12 close, and the assumption of C$6 billion ($4.8 billion) in debt. The $20 billion deal would create a wireless communications powerhouse with about 13 million customers in Canada.

Both companies also own cable TV operations, but most reports point to possible regulatory concerns on the wireless side of the business. Rogers already is the largest wireless service provider in Canada with about 10.9 million subscribers. Shaw is the fourth largest -- behind BCE and Telus Communications -- with about 2 million wireless customers.  

The Canadian government has been sensitive to competitive issues in the wireless market. Last March Prime Minister Justin Trudeau’s minority Liberal government ordered the three largest wireless service providers to slash prices in their middle range plans by 25% within two years or face regulatory action. 

As part of the Shaw deal, Rogers pledged not to raise prices for Shaw’s mid-range Freedom Mobile plan for three years after the deal closes. It also said it would invest about C$2.5 billion over five years to speed up construction and deployment of 5G networks.   

On a conference call with analysts to discuss the transaction, Rogers CEO Joseph Natale said it was “too early” to determine whether there would be regulatory issues, but that he was confident the deal would win approval.

The transaction will be examined by at least three Canadian government agencies -- the independent Competition Bureau of Canada, the Canadian Radio-television and Telecommunications Commission, and the department of Innovation, Science and Economic Development.

“We have been clear that greater affordability, competition and innovation in Canadian telecommunications are as important to us as a government as they are to Canadians concerned about their cell phone bills,” ISED minister of Innovation, Science and Industry Francois-Philippe Champagne said in a statement.  “These goals will be front and centre in analyzing the implications of today’s news. This transaction will be reviewed by the independent Competition Bureau of Canada, the CRTC, as well as ISED and we won’t presuppose the outcomes of these processes.”

In a blog post, Morningstar Research wrote that while there may be reasons regulators would want to nix the deal, it didn't see a strong reason to block it. 

“Most importantly, the companies are not major competitors -- 80% of Shaw’s revenue and 90% of its EBITDA come from its wireline business, which has essentially no overlap with that of Rogers,” Morningstar wrote. “In wireless, we estimate Shaw has only 4%-5% national market share, leaving it a minor player based on that metric.”

But the deal would remove the fourth largest player from the Canadian wireless market, which could cause some regulators concerns. 

“Regulatory actions and rules of spectrum auctions indicate regulators prefer four national wireless competitors, and Shaw has made major strides in recent years to position itself as the fourth,” Morningstar wrote. “Although Shaw’s wireless business remains relatively tiny, it has shaken up the industry. Most notably, we think it is responsible for moving each of the major companies to offer unlimited data plans and keep pricing down with its consumer-friendly and innovative deals.” 

That dilemma could be solved in any number of ways, including requiring the company to divest of some assets, similar to what the Competition Bureau required BCE to do when it bought Manitoba Telecom Services in 2017. 

CableOne said Monday it has started a public offering of about $400 million in new stock, with the proceeds going to pay down debt and for other corporate purposes, including possible acquisitions.

Cable One said it also has given its underwriters the option of purchasing an additional $60 million in shares through the offering.

J.P. Morgan Securities, BofA Securities and Wells Fargo Securities, LLC are acting as joint book-running managers for the offering.

CableOne shares have been one of the top performers in the cable selector for years, rising about 80% in 2019. The stock, up nearly 30% so far this year, was down slightly (1.6%) in afternoon trading Tuesday.

Cable One hasn’t been shy about purchasing other cable companies in the past -- it bought Fidelity Communications in 2019 for about $525.9 million -- but it is unclear as to what properties it would or could acquire. In its conference call with analysts to discuss Q1 results, chief financial officer Steve Cochran said the company would remain disciplined in any transaction, adding that it has had “a variety of things in process,” but that nothing new is happening yet.

“I think there is probably still some level of waiting to see what the markets are going to do from a debt standpoint and another before certain people jump in with opportunities,” Cochran said on the call.

Nevertheless, he said Cable One is interested in “broadband-related acquisitions and investment opportunities in rural markets, as well as capital projects intended to drive long-term growth,” adding that the company also believes there will be opportunities going forward.

The stock market’s crazy COVID-19 swings have wreaked havoc with share prices for many companies, wrenching through an extended, excruciating roller coaster. But few companies have seen the kind of bouncing that’s hit Roku, despite what should be its perfect pandemic positioning. 

A quick look at the company’s share prices the past year can induce vertigo, lurching from a high of more than $176 a share last fall to a bottom in mid-March, days after the United States began locking down, of barely $58, a nauseating 3X swing. 

Amid what should be good news for the company’s markets and opportunities, Roku shares since then have only partially recovered previous heights. Over the past month, prices mostly oscillated between $114 and $137 or so. 

One example of Roku’s ups and downs: May 14, when the market rallied strongly despite difficult news on unemployment numbers and China trade fights. The Dow rose 377 points; Nasdaq 80. 

But alone amid major media and tech stocks, Roku dropped 96 cents a share, nearly 1%, to less than $117. The proximate cause: Roku said it will issue up to 4 million more shares, diluting existing owners’ holdings. 

Also read: Roku Sees 80% April Streaming Hour Surge, Q1 Revenue Up 55% to $321M

There’s certainly plenty to celebrate for the company, given its heavy use by millions of suddenly self-isolating households in the United States and some other markets.  

During the first three months of 2020, Roku said users streamed a record 13.2 billion hours, up nearly 50% from a year ago. Viewing in April, the first full month of lockdown, was up 80%.

Active Roku user accounts increased by 2.9 million in the first quarter, reaching 39.8 million.Revenue for Roku’s ad-driven “platform” business increased 73% year over year to $232.6 million. Revenue for the hardware side of the business spiked 22% to $88.2 million. 

Two-thirds of analysts following the company rate it a buy, and even moderate skeptics such as Guggenheim’s Michael Morris say the company is well positioned. At the same time, however, Morris downgraded the stock to neutral (at a $120 target) and noted its sector-topping 53X multiple on projected 2023 earnings. For comparison, Netflix, where Roku founder Anthony Wood developed his first streaming device, is trading at 5X, and enjoying record share prices.

"We expect advertisers and investors will view (connected TV) as a secular growth business for an extended period as linear-television ratings continue to erode, and more ad-supported content is made available via streaming,” Morris wrote. "Given Roku’s significant, direct exposure to this business, we expect investors to view the company as a secular winner.”

By that, he means Roku almost can’t help succeeding, given its strong position in the U.S. market in sectors destined to thrive. But Roku is having to share that opportunity with an increasing number of deep-pocketed competitors.

At CES 2020, Amazon reported that it had 40 million Fire TV users, just slightly ahead of Roku’s reported numbers. Together, their roughly 80 million U.S. households represent 70% of the U.S. connected device market. 

But there are reasons for concern about Roku’s growth prospects.

First up is the list of competitors selling stand-alone streaming devices, “sticks,” and operating interfaces for smart TV.  The list includes Amazon, Apple, Google and Samsung, which all have valuations that dwarf Roku. 

In turn, that competition limits Roku’s international prospects. Kagan says Amazon Fire outsold Roku in overseas sales, 3.9 million to 2.6 million devices. While Roku is available in several major international markets, it has nothing close to the global reach of Amazon or Apple. 

And while Roku has relationships with value-priced connected-TV makers Hisense and TCL, it’s unlikely to significantly penetrate China’s giant market, given that government’s preference for homegrown media-distribution solutions. 

Add to the competitor list Comcast, which just announced that it has given away 1 million of its Xfinity Flex streaming devices to new broadband customers since announcing the product last fall. The giveaway is worth it for Comcast, because it can now market to those users products and services such as its Peacock streaming network (which debuted last month for all of its cable broadband subscribers ahead of a broader July 15 launch).  

Perhaps just as significantly, while Roku devices are optimized for a sleek and friendly video-streaming experience, they aren’t as capable when it comes to a rash of new use cases, from managing smart home devices to playing games, virtual reality experiences and more. Apple, for instance, touts its $4.99/month Arcade game subscription for use on Apple TV as much as iPads, iPhones and Macs. 

Google and Amazon are also getting into gaming in a big way, and lead the smart home/smart assistant race too. Roku has no part of any of that. 

There are even reasons to question the company’s success with its free Roku Channel, a big strategic focus given the significant ad  and subscription revenue it generates. 

Like the other free, ad-supported TV services out there (Tubi, Xumo, Pluto, IMDb TV), the Roku Channel features thousands of hours of shows you may have seen before somewhere else, from The Waterboy to Driving Miss Daisy, and My Favorite Martian to Duck Dynasty. It also enables the company to showcase and sell premium channels such as HBO Now and Showtime, for which it takes a cut. 

Roku’s generated $528 million in ad revenue in 2019, up 82% from the previous year. But in the company’s latest earnings call, executives said the general weakness in ad markets is affecting Roku, too. 

The channel store faces more subtle challenges. HBO Max, for instance, is set to debut on May 27. Much attention has been paid to comments made by AT&T’s soon-to-be CEO, John Stankey, that HBO Max won’t launch on Amazon Fire TV. 

But notably, AT&T hasn’t announced an app for Roku, either. 

Also read: AT&T Doesn’t Want Amazon to ‘Disaggregate’ HBO Max into Prime Channels, Analyst Says

This is possibly because AT&T/Warner Media wants to drive viewers to its standalone app, where it can keep to itself all the audience data, relationships and other valuable assets, as ,

“Will Roku allow HBO Max to offer an app on Roku devices, if HBO Max does not allow its Max exclusive content to be part of the Roku Channel…” LightShed analyst Richard Greenfield wrote. “For channel platforms, allowing HBO to effectively exit channel stores essentially spells the beginning of the end to a one-stop destination for streaming content…That’s a problem for Roku, given that its channels are a big part of the one-stop shopping appeal of the Roku Channel.”

And—this is important—Roku still isn’t making money, despite all the audience usage. It reported a net loss of $54.6 million in Q1, on $321 million in revenues. The good news is revenues rose 55% compared to 2019, and exceeded analyst expectations. 

Roku executives said they are in good position to get to profitability, especially when the economy recovers and ad spending kicks back in. But even now, Roku says buyers will shift increasing amounts of ad spend to streaming platforms as they look for value in a bad economy. 

“While advertisers are spending less, reduced budgets mean marketers are looking for ways to invest more effectively and this should accelerate the shift to streaming ad buys,” Roku CEO Wood said.

It may be that, long term, Roku can find a sustainable perch as a niche player riding demand for good video-streaming experiences that aren’t integrated into one of its giant competitors. But Roku shareholders likely will continue to face a wild ride as the company competes amid giants in an uncertain new world. 

World Wrestling Entertainment stock started to inch back this week, rising more than 3% in early trading Tuesday but still far short of reversing the 27% decline of the shares since it fired two top executives a week before it is scheduled to report Q4 results.

WWE shares were priced at $48.97 each in afternoon trading Feb. 5, 3.4% above their closing price the day before, when they rose another 2.8%. The shares are still well behind their price on Jan. 30 ($62.30), when the company announced its co-presidents George Barrios and Michelle Wilson had abruptly left the company. News that the well-liked and respected executives were gone, and a statement from the company that they had differences as to the direction of the company with chairman and CEO Vince McMahon, sent the stock into a tailspin. WWE stock fell 21% on Jan. 31 to $48.88 per share and another 6% on Feb. 1 to $46.08 per share.

“I am grateful for all that was accomplished during their tenure, but the Board and I decided a change was necessary as we have different views on how best to achieve our strategic priorities moving forward," McMahon said of Barrios’ and Wilson’s departure in a press release.

That has led to some wild speculation about the executives’ departure, none of which has been substantiated.  But if nothing else, it appears that McMahon, who has come under criticism as WWE ratings have plunged, will have a lot to answer to during its Q4 earnings call on Feb. 6.

Already some analysts have chimed in, and many will likely try hard to make sense of the changes and seek solutions to the scripted sports giant’s ratings decline. But as one pundit put it, the responsibility will ultimately land in McMahon’s lap.

WWE has been on shaky ratings ground for awhile. Although Barrios and Wilson were praised earlier this year for landing a carriage deal for its SmackDown programming with Fox, ratings have been poor. And they’ve been poor for awhile.

Still, Barrios and Wilson had been the public face of WWE, and losing two seasoned executives at a time when the traditional TV market is in constant turmoil is not something investors would cheer. Over the past 12 months, WWE shares have declined 43%, from $82.34 on Jan,. 31, 2019.

Related: WWE: Suspending Disbelief

Injuries to top talent like Roman Reigns and AJ Styles were blamed for ratings softness last year, but those wrestlers have since returned and the viewership numbers haven’t gotten better. 

In a blog post, LightShed Partners media analyst Brandon Ross said despite the changes McMahon has already made, engagement with WWE content is disappointing and ratings at its flagship SmackDown are down even after it moved to Fox.

“We anticipated at least 3 million weekly viewers given the increased reach of broadcast TV and the breadth of Fox’s substantial promotion platform,” Ross wrote. “Viewership has settled in at ~2.4 million per week.”

Ross added that he has no knowledge of the circumstances behind Wilson’s and Barrios’ departures or even if they should bear any if the blame for WWE’s ratings slump.

“However, what we do know is that content needs to improve at WWE if the company is going to be investible,” Ross wrote. “And no matter who comes in to take the place of the former Presidents, the burden of improving the content sits squarely on Vince, who has held tight control over the creative at WWE for decades.”

Righting the WWE ship will be critical over the next three years, Ross wrote, pointing out that is when Monday Night Raw and SmackDown enter their next renewal cycle.

“While the stars aligned last deal for rights to be bid up, we are very skeptical a remotely similar demand backdrop will exist,” Ross wrote. “The entirety of the $465 million per year WWE is receiving domestically comes from the Pay TV universe, where subscriber losses continue to accelerate.”

Ross added that by the time talks start again for the programming, pay TV subs could be in the 70 million range, substantially reducing the WWE’s negotiating leverage.

“Vince McMahon, the pressure is on,” Ross wrote.

Liberty Media chairman John Malone has sold his remaining shares in Lionsgate Entertainment to the studio's non-executive chairman Mark Rachesky and his own international cable firm Liberty Global.

According to a filing with the Securities and Exchange Commission Oct. 3 by Rachesky’s MHR Fund Management, MHR agreed to buy 2.4 million shares of Lionsgate stock from Malone for about $22.1 million on Oct. 2. After the deal, MHR beneficially owned about 22% of Lionsgate’s Class A voting shares and 11% of its Class B non-voting shares.

In a separate SEC filing Thursday, Malone revealed he sold about 520,000 shares of Lionsgate stock on the open market between Sept. 27 and Sept. 30 for between $9 and $9.80 per share. With those sales, the filing stated that Malone “beneficially owns no shares” of Lionsgate Class A voting stock.

Malone sold about 1.2 million shares of Lionsgate stock between Sept. 9 and Sept. 20 at prices ranging from $9.48 to $11.73 per share and from Aug.19 to Sept. 6 shed 1.4 million shares at prices ranging from $8.90 to $11.33 per share. At about the same time, Liberty Global revealed in an SEC filing that it had increased its stake in Lionsgate to 4.9% of its outstanding shares.

Malone has been actively cutting down on business travel and reducing his board positions over the past several months -- last year he stepped down from Lionsgate’s board of directors (he was replaced by his nephew Daniel Sanchez) and also retired from Charter Communications' board. 

The Lionsgate sale comes about three years after Malone became one of Lionsgate’s top  individual shareholders when Liberty Media sold its Starz LLC premium network to the studio for $4.4 billion in 2016. As part of that deal, Malone -- who had swapped his 4.5% interest in Starz for a 3.4% stake in Lionsgate and a seat on its board of directors a year earlier -- saw his overall interest in the studio rise to about 8.1% of outstanding shares. He has been gradually reducing that stake ever since. 

Netflix stock fell more than 7% Friday after chairman and CEO Reed Hastings told an industry audience that the emergence of new streaming competition from Disney and Apple will create a “new world” of competition.

Hastings was speaking at the Royal Television Society Conference in Cambridge, U.K., and said that beginning in November -- the expected launch dates of Disney+ and Apple TV + -- “it’s a whole new world,” according to reports.

Hastings also name-checked NBC Universal’s planned direct-to-consumer offering Peacock, adding that the competitive landscape will be “tough.”

“Direct-to-consumer [customers] will have a lot of choice,” he said, according to a Variety report. 

But according to The Hollywood Reporter, Hastings said that Netflix has been preparing for the onslaught of SVOD competitors since 2012, and was surprised it hadn’t occurred sooner.

“Sometimes you do your best work when you're challenged,” he said, according to THR.

Still, acknowledging the competition and coming off a bad Q2 -- where Netflix lost domestic subscribers for the first time -- was enough to send the stock southward. Netflix shares traded as low $266 each (down 7.2%) on Sept. 20, before closing at $270.75, down 5.5% or $15.85 per share.

Related: Bull or Bear on Netflix: It Depends on Which Side of the Street You’re On

The Friday drop-off basically erased the stock’s gains for the year.

Netflix stock took a beating in July when it announced that it had lost domestic subscribers in the second quarter. The stock continued on a downward slope after that announcement, falling below $300 per share on Aug. 14. With the exception of a brief rise on Aug. 16 (to $302.80 per share) and Aug. 19 (to $309.38), the stock continued to stumble and is down a collective 13% ever since.

Hastings said Netflix would boost its programming spending in the U.K. -- it is on track to spend more than $500 million this year in Britain, a figure that would "not quite double" in 2020, according to THR. 

“Some day The Crown will look like a bargain,” he said according to THR, of the Netflix series estimated to cost between $6.5 million and $13 million per episode. 

He expects content costs to rise higher with new players Disney + and Apple in the mix, adding that Netflix was outbid by Amazon for one show in particular that he coveted -- Fleabag, the critically acclaimed hit series by Phoebe Waller-Bridge.

Netflix stock fell more than 7% Friday after chairman and CEO Reed Hastings told an industry audience that the emergence of new streaming competition from Disney and Apple will create a “new world” of competition.

Hastings was speaking at the Royal Television Society Conference in Cambridge, U.K., and said that beginning in November -- the expected launch dates of Disney+ and Apple TV + -- “it’s a whole new world,” according to reports.

Hastings also name-checked NBC Universal’s planned direct-to-consumer offering Peacock, adding that the competitive landscape will be “tough.”

“Direct-to-consumer [customers] will have a lot of choice,” he said, according to a Variety report. 

But according to The Hollywood Reporter, Hastings said that Netflix has been preparing for the onslaught of SVOD competitors since 2012, and was surprised it hadn’t occurred sooner.

“Sometimes you do your best work when you're challenged,” he said, according to THR.

Still, acknowledging the competition and coming off a bad Q2 -- where Netflix lost domestic subscribers for the first time -- was enough to send the stock southward. Netflix shares traded as low $266 each (down 7.2%) on Sept. 20, before closing at $270.75, down 5.5% or $15.85 per share.

Related: Bull or Bear on Netflix: It Depends on Which Side of the Street You’re On

The Friday drop-off basically erased the stock’s gains for the year.

Netflix stock took a beating in July when it announced that it had lost domestic subscribers in the second quarter. The stock continued on a downward slope after that announcement, falling below $300 per share on Aug. 14. With the exception of a brief rise on Aug. 16 (to $302.80 per share) and Aug. 19 (to $309.38), the stock continued to stumble and is down a collective 13% ever since.

Hastings said Netflix would boost its programming spending in the U.K. -- it is on track to spend more than $500 million this year in Britain, a figure that would "not quite double" in 2020, according to THR. 

“Some day The Crown will look like a bargain,” he said according to THR, of the Netflix series estimated to cost between $6.5 million and $13 million per episode. 

He expects content costs to rise higher with new players Disney + and Apple in the mix, adding that Netflix was outbid by Amazon for one show in particular that he coveted -- Fleabag, the critically acclaimed hit series by Phoebe Waller-Bridge.

Shares of The Walt Disney Co., rose nearly 13% Friday, the first trading day after the content company revealed detailed plans for its Disney+ streaming service.

Disney shares rose as much as 12.6% ($14.30 each) to $130.90 per share in early trading Friday. The stock was trading at $128.18 (up 9.9%, or $11.58 each) at 12:08 p.m. on April 12.

Disney unveiled details of its long awaited Disney+ streaming service and an Investor Day event on April 11. The service, which will launch on Nov. 12, will be priced at $6.99 per month and include library and original content from its various networks and studios.

In a research note, MoffettNathanson senior analyst Michael Nathanson said the announcement of the $6.99 price point at the event caused a “collective gasp” in the room, adding that the service “looks like a bargain compared to other entertainment options.”

Wolfe Research managing director Marci Ryvicker added in a note to clients that the price point is a clear indication that Disney is going for market share with the Disney+ product, adding that she was surprised at the level of detail the company offered on the service at the event.

“Bottom line: we got what we needed and we REALLY like what we heard,” Ryvicker said of the Investor Day.

As Disney stock soared, its rival Netflix saw its shares undergo some pressure. Netflix shares fell as much as 5% in early trading Friday. They were priced at $353.38 each (down 3.9%) at 12:08 p.m. on April 12.

Disney said it expects Disney+ to attract between 60 million and 90 million customers by 2024. 

Less than five months after his “sell” rating on Dish Network sent the stock into a tizzy, MoffettNathanson principal and senior analyst Craig Moffett has raised his outlook on the satellite giant to “neutral,” adding that the steep decline in share price over the past several months shows the market is finally reflecting the risk of a sale or a build out of its wireless spectrum.

Market reaction to the upgrade was lukewarm at least in early trading, where shares rose 11 cents each (0.4%) to $25.99 per share.

Dish shares were down about 48% in 2018 according to Moffett, compared to the S&P 500 Index, which fell 4% in the same period. Moffett has warned in the past that investors have placed too high a value on Dish’s wireless spectrum, which it has said it will begin building out to meet a March 2020 federal deadline.

In August, Moffett downgraded Dish to “sell,” claiming that the only recourse for the satellite company was to sell that spectrum, which he valued at about $1 per MHz POP (compared to some valuations as high as $3 per MHz POP), and sending its stock down about 4%. On Thursday he wrote that the decline in Dish’s stock price has brought the risk-reward to owning the shares into balance.

“Yes, there is still a great deal of downside risk if Dish Network doesn’t sell its spectrum,” Moffett wrote. “But there is also upside risk if they do.”

Moffett added that at its current mid-$20s range, Dish stock reflects both sides of the risk equation. If there is no sale, Dish stock will likely fall even further, but if there is a sale, it will be at a price that is “meaningfully above” its current level, he wrote. 

Dish has said it will spend about $1 billion on the first phase of the network, which it envisions as a narrowband IoT offering connecting devices and technologies across the spectrum.  According to its federal requirements, Dish must build out the spectrum to 70% of its license territory by March 2020. Dish has said it has every intention of meeting that deadline.

As the deadline to build its wireless network looms, Dish Network is getting the cold shoulder from Wall Street.

MoffettNathanson principal and senior analyst Craig Moffett slapped a “sell” rating on the stock and warned investors that the fail-safe for any network construction problems — the potential sale of its spectrum — has faded.

Moffett downgraded Dish to sell on Aug. 13, reducing his 12-month price target on the stock to $29 per share, just days after improved subscriber metrics boosted shares by 20%. After a dip, the stock has risen slightly, closing at $35.35 on Aug. 16. “Dish’s equity value is all in its spectrum, and there, the story has gotten worse,” Moffett wrote in a note to clients.

Use It or Lose It

Dish has been accumulating wireless spectrum for about seven years — its first buy was in 2011. While that has helped its stock price over time, the fact that the satellite giant is nearing federally imposed deadlines to start building a network to utilize (or lose) those wireless licenses is starting to put pressure on the shares. Dish stock, down 17.6% in 2017, is down another 26.1% this year, despite the recent gains.

Still, many analysts warn that Dish chairman Charlie Ergen shouldn’t be counted out just yet, as he’s come out on the better end of bigger scrapes before.

Ergen has done a “masterful job over the last five years of milking what is clearly a declining core satellite TV business (and smartly putting effectively all of his debt on the DBS business, leaving the parent debt-free in a worst-case DBS scenario) into attractive massive spectrum holdings acquired at substantial discount to the market,” Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak wrote in a note to clients.

But so much of Dish’s value has been placed in its spectrum holdings — Ergen himself has called satellite TV a declining business for years, and launched Sling TV (the largest in the OTT space) in 2015 to prove it — that any hiccups in the wireless business can send investors into a panic.

Part of the problem is that in the past, if the network build didn’t work out, investors could rely on a spectrum sale to make everything better. Now even that avenue appears to be closing.

Moffett contends that with a March 2020 deadline to reach 70% of its licensed footprint with a new wireless network, no buyer could complete the regulatory approval process and still come under the deadline. Whether Dish ever had intended to sell the spectrum — Ergen said in an earnings call earlier this month that he never said publicly he wanted to sell it — that option appears to be off the table.

That leaves building out the network. And though Dish said that process has begun and it fully expects to meet the March 2020 deadline, it’s not the March 2020 deadline Moffett is worried most about — that should cost about $1 billion. It’s the second stage, a wideband 5G network that could have a $10 billion price tag, that gives the analyst the shivers.

Adding to the pressure is Dish’s debt structure. Dish can easily meet its debt obligations of between $1 billion and $2 billion over the next two years with its existing free cash flow, Moffett said. But the picture changes in 2024, when $5 billion in debt matures. With free cash flow expected, by Moffett’s estimates, to shrink from $1.1 billion in 2018 to negative $237 million by 2022, it could be difficult for Dish to pay its debt.

That FCF decline isn’t a total given. Moffett wrote that the satellite unit’s rate of descent could be slowed as its subscriber base reaches a level of stickier, more loyal customers, which appears to have helped lessen losses in Q2.

Moody’s Investors Service senior vice president, senior analyst Neil Begley said while the mysteries around what Dish will do with its spectrum are many, the satellite company does have several options. But to Begley, the key to Dish’s overall strategy is finding a deep-pocketed partner to finance phase two of the wireless network

With a narrowband Internet of Things network in place (phase one), the more robust 5G phase two offering could attract potential investors from Silicon Valley, the automotive industry, private equity and more, Begley said.

“IoT, once they get it off the ground and it becomes operable, there will be a line at the door,” Begley said. “But between here and when it’s built, there’s a lot of uncertainty. He [Ergen] needs to do something”

Ergen: I Have a Plan

For his part, Ergen is aware that Dish has to take action. In its Q2 conference call with analysts, he shed more light on his strategy toward 5G, adding that the satellite giant has raised more than two-thirds of the capital needed for phase one. He likened Dish’s current situation to the early days, when it was seeking partners to launch satellites for its TV business, adding that in the end, it all boils down to the validity of its business plan.

“There isn’t an industry in the next decade that doesn’t need what we’re going to build,” Ergen said, adding that tens of billions of dollars is being invested in technologies like self-driving vehicles, health care and artificial intelligence that will need access to an IoT network. “You’ve got have a good business plan. And we’re going to have a good business plan.”

Shortly after agreeing to step dwon, former Viacom CEO Philippe Dauman sold nearly half a million shares of Viacom stock.

Dauman disposed of 200,000 Viacom B shares on Aug. 22 and another 227,046 share on Aug. 23 at almost $42 a share, according to a filing with the SEC. Total proceeds from the sales were $17.8 million.

Dauman continues to own more than a million shares of the media company. Viacom stock closed Wednesday at  $41.34 cents a share, down 0.86%, making Dauman’s remaining holdings worth $41.4 million.

Read more at broadcastingcable.com.

Home shopping channel Evine Live said in a Securities and Exchange Commission filing that it is back in compliance with the NASDAQ National Market System after having traded above $1 per share for 10 consecutive days.

Evine received a warning from the stock exchange on March 21 that its shares were in danger of being delisted because its stock had sunk below the $1 per share threshold for 30 consecutive trading days. Evine has undergone some management changes in the past several months, most notably the resignation of CEO Mark Bozek.

The company had 180 days from its notification to get back into compliance. Accordnig to the filing, after achieving the 10-day milestone, NASDAQ considers the matter closed. Evine shares closed at $1.23 each (up 2 cents) on April 13.

Viacom shares were down more than 21% Tuesday after disappointing fiscal first quarter results only seemed to exacerbate what has been a trying time for the programmer.

Viacom’s domestic ad revenue dipped 4% in the fiscal first quarter, the latest in a long line of declines which apparently spooked investors enough to ignore an announced advertising venture with Snapchat and an extension to its carriage negotiations with Dish Network.

Viacom shares were down as much as 22% ($9.34 each) to $32.51 in early trading Tuesday, closing  at $32.86 each, down 21.5% ($8.99 per share).

Viacom has been under pressure for more than a year on stiff ratings decline as its largely millennial and younger subscriber base has shifted their viewing habits to online and over-the-top video. Turmoil surrounding succession issues with founder and largest shareholder Sumner Redstone, who passed the executive chairman title to CEO Philippe Dauman last week, also have weighed on the stock.

Altice CEO Dexter Goei didn’t waste any time clearing the air about his greater intentions across the Atlantic, telling analysts and reporters Wednesday that he is poised to use the European telecom company’s latest acquisition – Suddenlink Communications – as a vehicle to consolidate the U.S. cable market.

On a conference call to discuss the Suddenlink deal, Goei said that every property “below Comcast is effectively in consolidation mode. We clearly expect to be right in the middle of that consolidation.”

That comment helped goose the stocks of several cable operators skyward – Cablevision Systems soared 11% and Time Warner Cable, said to be in Altice’s sights already, rose 3%. Charter Communications, which up until this morning was expected to be the prime consolidator in the U.S. cable market, saw its stock dip about 1%.

Cablevision Systems CEO Jim Dolan effectively put his company in play at INTX: The Internet & Television Expo earlier this month when he said that efforts should concentrate on consolidating markets and not companies. He offered the New York metro market — in which Cablevision operates — as a prime candidate.

Analysts were split on whether Altice would set its sights on Cablevision – it already has had some preliminary talks with Time Warner Cable, according to reports – and questions around its valuation and competitive position (it has the highest exposure to Verizon’s FiOS TV in the industry) could cloud a deal.

Pivotal Research Group CEO and media & communications senior analyst Jeff Wlodarczak wrote in a note to clients that Altice’s entrance into the consolidation fray could make Cablevision an attractive buy.

The presence of an aggressive Altice plus what appears to be Cablevision’s increasing willingness to sell plus our previous belief that Cablevision HAS to sell based on the direction of its core operations means the likelihood of a successful sale of the company has risen materially,” Wlodarczak wrote, adding that an Altice buy is not a slam dunk. He said “we believe Altice has to do more deals and the sizeable costs cuts available at Cablevision will likely prove to ultimately be attractive for Altice.”

Viacom shares continued to dip Thursday, the second full day after Citigroup media analyst Jason Bazinet downgraded the stock to “sell,” but the drop was less dramatic than in earlier trading.

Viacom shares closed the day down 2% ($1.32 per share), finishing at $66.48 each. It was an improvement over the 7% drop the stock endured Jan. 14 – Falling $4.83 per share to $67.80 each – after Bazinet said he expected the company could be dropped by Dish Network in its next round of carriage negotiations.

Bazinet said he didn’t know when that would happen – he guessed sometime this year – but said there was at least a 50% chance it would come true. He drew on other distributors that have dropped the troubled youth-oriented channels – like Cable One and Suddenlink Communications – which so far have been able to navigate the darkness with manageable subscriber losses.

If Dish does decide to drop the channels, it would be the latest and largest blow to the home of MTV and Comedy Central in what has been an increasingly pugilistic past 12 months. In April, Viacom channels went dark to Phoenix-based Cable One, leaving its 500,000 video subscribers without access to youth-oriented programming like Teen Mom, The Daily Show and SpongeBob Square Pants.  In October, the Viacom networks went dark to Suddenlink Communications' 1.1 million customers.

Dish, with 14 million subscribers, would be the largest distributor to decide not to carry Viacom. While neither side would comment on carriage negotiations, someone familiar with the process said that Viacom’s Dish deal doesn’t expire for at least another year.

Dish has not been shy about allowing networks to go dark – eight Turner networks (including CNN, Adult Swim and Cartoon Network) were lost to the satellite company’s customers for about a month last year before an extension was worked out to get them back on the air through March. The two have since reached a long-term deal for the channels.

Other spats include a 46-hour blackout of Viacom channels in 2004, AMC Networks’ nearly four months of zombie-free darkness in 2012 and others.  

Dish was also locked in a blackout of Fox News Channel and Fox Business Network, but the nearly four-week standoff that has resulted so far in the loss of 90,000 Dish customers, according to Fox officials, was resolved Thursday.

While Dish could be using a potential blackout as a negotiating tactic – much like most cable networks do with distributors – it seems that the Viacom networks would be an important part of the lineup for Dish’s new over-the-top service, dubbed Sling TV. Viacom channels were conspicuously absent from the 12 channels that will initially be part of Sling TV’s introductory $20 per month package.

It should be noted that while Viacom appears to be a popular whipping boy when it comes to carriage negotiations, it secured several deals over the past 12 months representing about 25% of its subscriber base, including agreements with Time Warner Cable and Verizon Communications. During its fiscal fourth quarter conference call with analysts in November, Viacom CEO Philippe Dauman said that the programmer had about 70% of its subscribers were covered by deals that won’t expire for the next three to eight years.

Bazinet also warned that losing Dish could force Viacom into seeking out a deal -- perhaps recombining with its former corporate partner CBS – to secure carriage. In Bazinet’s thinking, distributors would be hard pressed to darken Viacom’s networks if it also meant dropping the CBS broadcast network.

Being acquired by another programmer is also an option, albeit less likely because of the size of a potential deal and Viacom’s own ratings pressures. Bazinet said that a possible suitor could be Discovery Communications, but set the odds of a deal happening at about 10%.

While losing out on Dish’s 14 million subscribers would cut into Viacom’s bottom line – Bazinet estimates it would result in a loss of $704 million in ad revenue and affiliate fees for the programmer – subscriber losses could go both ways. While Cable One said its subscriber losses leveled off after the initial shock of losing Viacom channels wore off, its markets are largely rural, largely conservative and largely older. There’s no telling whether Dish’s subscriber base – a mix of rural and more urban markets nationwide – would react the same way.   

Some have speculated that Dish could be putting forth the idea of dropping the channels to force Viacom to sign on to Sling TV – Viacom already has done deals for Sony’s PlayStation Vue OTT service – it seems a little odd that it would start this fight a year before it had to. Every carriage deal Dish has done so far for Sling TV was done in the normal negotiating cycle, including Turner, Disney, Scripps and A+E Networks. A+E Networks did not make it to the initial lineup of 12 channels, but is expected to show up in later iterations of the product.

“It’s hard to get a deal done outside of a deal cycle,” said one industry executive familiar with the matter.

It also seems odd that Dish would pick a fight with Viacom even as it uses the company’s programming as a marketing tool to lure Cable One and Suddenlink customers to Dish. Dish resellers have regularly used character images from Viacom shows – SpongeBob is particularly popular – in marketing to attract former cable customers to the fold.

Still, stranger things have happened in the world of carriage negotiations. Only time will tell if this gets added to the list.  

Apologies for the Shakespeare (and John Greene) reference, but talk again has resumed on a possible sale of premium channel Starz, this time with the network  possibly approaching CBS and Lionsgate who are possibly in early talks for the premium network.

While we have been down this road before – in September Starz held “courtesy” talks with 21st Century Fox which never materialized into an actual deal – what strikes me isn’t whether Starz will be sold or not – that is inevitable some time down the road – but the market’s reaction to a possible deal, which was tepid at best. Starz stock was up about 2% the day the news broke, which worked out to a gain of 78 cents per share to $32.98 each, nothing to sneeze at, but not the kind of rise that makes you think of beach houses and early retirement. And compared to the 6% boost the shares got in September when everyone thought the premium network was in line for what Liberty Media chairman (and 49% Starz owner) John Malone has called a “big brother,” it’s downright small.

Could it be that the typical market reaction to these non-deals – a high single digit one-day boost in stock price – is getting harder to come by?

The notion that Starz is in play is nothing new – that has been the case practically ever since the premium network was spun off from Liberty Media in 2013. But the service, once reliant almost exclusively on movie content, has been making some critical and ratings hay recently with a strong slate of original shows – its Outlander series is a bona fide hit and shows like Black Sails and Power are attracting viewers – and has been investing heavily in new shows under the stewardship of CEO Chris Albrecht. In the third quarter, Starz said it added about 500,000 subscribers to the premium channel and has beefed up its original programming investment. That will include a reboot of the Evil Dead zombie franchise with actor Bruce Campbell and director Sam Raimi called Ash vs. The Evil Deadand others.

Starz will undoubtedly serve as a strong programming asset to a larger player – maybe even CBS, which already has premium network Showtime, or Lionsgate, which has a strong TV production arm that has cranked out hits for other networks like Mad Men and Weeds and Orange is the New Black. But the time may not be quite right for the programmer to hang up a For Sale sign.

Pivotal Research Group principal and senior media & communications analyst Jeff Wlodarczak said a $5 billion valuation for Starz is not unacceptable – it works out to about $36 per share, a 10% premium to its Nov. 24 close. But it also assumes that there is a fairly robust auction for the company, which Wlodarczak doesn’t quite see at the moment.

Wlodarczak said in the past AMC Networks was a possible Starz suitor, but its agreement to purchase a 49% interest in BBC America made that less likely. CBS has said in the past that it wasn’t interested in another premium network, but it could change its mind. 

“Realistically there are not that many bidders, even though a deal is very accretive to any large media conglomerate,’ Wlodarczak said. “The issue is it is likely too small of a deal to move the needle.”

And therein, to borrow another line from the Bard, lies the rub. It’s not like Starz wouldn’t be a good asset for a larger company, just that it probably wouldn’t be big enough to make much of a difference. Wlodarczak estimates that Starz will generate about $1.7 billion in revenue and $468 million in operating cash flow in 2014, or about a third of the $4.9 billion in revenue and $1.7 billion in operating income it’s chief rival, HBO, generated last year.