business newsTurn the Page: Winners and Losers in the Media Sector
By
Steve Birenberg
Nov 14, 2012 4:45 pm
Now that earnings announcements are behind us, here are nine winners and seven losers in media.
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Coming off of another quarterly earnings season, media stocks seem to be back to where things were earlier this year with investor sentiment toward macro issues driving performance. I still see more differentiation among media stocks based on individual company fundamentals. However, I see the winners and probable leaders of any rally being heavily influenced by the overall market trends. Lately, of course, that is down. Before focusing on which stocks to own or sell, let’s recap the big picture one final time.
National TV advertising was OK in the third quarter given the competition from the Olympics and the election season. CBS (NYSE:CBS) actually called out the political conventions as a drag. Cable network advertising looks like it was up mid-single-digits. Broadcast was softer but the third quarter is seasonally weak before the new season begins with higher upfront pricing. Local TV did well, boosted by political and continued strength from the rebounding auto industry. Radio lost share. Internet continued its double-digit growth trend and market share gains. Several sell side analysts have noted one area of concern – advertising agencies are seeing a persistent slowing in domestic growth.
Investors were more focused on guidance and the advertising agency comments feed into concerns. Most TV networks are calling for a stronger fourth quarter driven by higher pricing in the new TV season and favorable scatter. My sense, however, is that analysts were expecting a little more out of ad growth guidance. Furthermore, management comments about “strong” scatter markets seem at odds with what advertisers and agencies are saying. Add in escalating worries about the fiscal cliff and Europe and the ascension of macro as a driver for the stocks makes sense.
In cable and satellite, it was a mixed quarter as well. Subscriber metrics were a little light and again raised concerns about cord cutting. Strength in broadband for cable remains. Diverging strategic direction and competitive impact is also creating winners and losers in multi-channel TV distributors. Capital spending and free cash flow is particularly important for these stocks and a few companies are on a different cycle facing pressures. Macro is less of an issue for cable and satellite as housing appears to be rebounding giving a little boost – or removing a negative – from the group. An interesting thing to watch is whether a continued housing recovery begins to firm up video subscriber growth. If it does not, the cord cutting debate will get very loud again.
National TV advertising was OK in the third quarter given the competition from the Olympics and the election season. CBS (NYSE:CBS) actually called out the political conventions as a drag. Cable network advertising looks like it was up mid-single-digits. Broadcast was softer but the third quarter is seasonally weak before the new season begins with higher upfront pricing. Local TV did well, boosted by political and continued strength from the rebounding auto industry. Radio lost share. Internet continued its double-digit growth trend and market share gains. Several sell side analysts have noted one area of concern – advertising agencies are seeing a persistent slowing in domestic growth.
Investors were more focused on guidance and the advertising agency comments feed into concerns. Most TV networks are calling for a stronger fourth quarter driven by higher pricing in the new TV season and favorable scatter. My sense, however, is that analysts were expecting a little more out of ad growth guidance. Furthermore, management comments about “strong” scatter markets seem at odds with what advertisers and agencies are saying. Add in escalating worries about the fiscal cliff and Europe and the ascension of macro as a driver for the stocks makes sense.
In cable and satellite, it was a mixed quarter as well. Subscriber metrics were a little light and again raised concerns about cord cutting. Strength in broadband for cable remains. Diverging strategic direction and competitive impact is also creating winners and losers in multi-channel TV distributors. Capital spending and free cash flow is particularly important for these stocks and a few companies are on a different cycle facing pressures. Macro is less of an issue for cable and satellite as housing appears to be rebounding giving a little boost – or removing a negative – from the group. An interesting thing to watch is whether a continued housing recovery begins to firm up video subscriber growth. If it does not, the cord cutting debate will get very loud again.
No positions in stocks mentioned.
Entermedia is a long/short equity hedge fund focused on media, communications, and related technologies. Steve Birenberg is co-portfolio manager of Entermedia, owns a stake in the Funds’ investment management company, and has personal monies invested in the Funds. CBS and Discovery Communications are widely held by Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a long only registered investment advisor.
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Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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