Comcast (CMCSA) is scheduled to announce quarterly results on April 27, while Paramount (PARA) and Warner Bros. Discovery (WBD) are expected to report earnings on May 4 and 5, respectively. What to watch for:
MYRIAD OF ISSUES: In a pre-earnings research note, KeyBanc said it believes Q1 earnings are unlikely to be a positive catalyst across its Media coverage as stocks have a myriad of issues. These include secularly challenged Linear TV business, unknown future profitability in Streaming, and near-term cyclical macro headwinds. The firm’s Consumer Media survey and Streaming churn analysis have not painted a better picture, it adds. KeyBanc expects advertising to be under pressure, affiliate revenue also under pressure from subscriber losses and lack of pricing, and streaming subscriber growth in the U.S. is likely minimal. The firm has Overweight ratings on Comcast and Disney (DIS), Sector Weight ratings on Fox Corp. (FOXA), Paramount, and Warner Bros. Discovery.
Click here to check out Comcast’s recent Media Buzz Sentiment as measured by TipRanks.
BULLISH ON COMCAST: Atlantic Equities analyst Hamilton Faber upgraded Comcast to Overweight from Neutral with a price target of $44, up from $36. The shares have underperformed the S&P 500 Index by 30% over the past two years as broadband additions have dried up, and growth investors have exited the stock, the firm tells investors in a research note. However, Atlantic Equities believes broadband expectations are now "de-risked" with some potential upside to estimates as the housing market rebounds. Furthermore, in the event of a recession later this year, Comcast is well positioned as a defensive name, contends Atlantic. The firm has also modelled an acquisition of Warner Bros. Discovery and subsequent spin of the enlarged content business, and believes this could add $8 per share to Comcast.
Earlier this month, KeyBanc also upgraded Comcast to Overweight from Sector Weight with a $44 price target as it believes the near-term setup in cable and wireless is most attractive for cable. Estimates are de-risked, macro and competitive data points are improving, and stock valuations "can likely revert to mean" as comfort toward the competitive environment improves, KeyBanc tells investors in a research note. The firm favors "inexpensive, lower leverage" names and sees company-specific catalysts for specific names.
BEARISH AHEAD OF RESULTS: Wells Fargo is estimating Q1 Paramount ads to be down -8% year-over-year to $2.6B. Paramount vying for an ad recovery in the second half of the year could rattle 2023 consensus OIBDA of $2.5B if the market doesn’t recover, the firm says. The WSJ reported that PARA is looking to sell majority stakes in both Noggin and BET Group, but wants to keep minority interests as it sees growth prospects in both. Simon & Schuster is also still up for sale. Wells thinks this is indicative of how strained the balance sheet is. The firm has an Underweight rating on the shares with a price target of $11.
HBO MAX RELAUNCH: Earlier this month, Truist initiated coverage of Warner Bros. Discovery with a Buy rating and $19 price target. The firm expects the HBO Max relaunch to drive renewed subscriber and average revenue per user momentum and for the company’s multi-year deleveraging to support the equity value. Warner Bros. Discovery’s valuation provides a "low hurdle" with upside potential to adjusted EBITDA estimates, Truist told investors in a research note.
Published first on TheFly
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