Wells Fargo securities analyst Marci Ryvicker says a victory for Aereo at the Supreme Court would likely send pure-play TV stocks lower by 15%-20%. The ruling is expected before July 4 and could come as early as today.
Aereo SCOTUS Win Could Hurt TV Stocks
The stocks of pure-play TV station groups like Media General, Sinclair and Nexstar will take a 15%-20% hit if Aereo prevails against the broadcasters in the Supreme Court, according to the latest memo from Wells Fargo securities analyst Marci Ryvicker.
CBS shares would decrease around 7%, a bit more than the other major “diversified” broadcast companies, the memo says. “[W]e have a hard time seeing anything more than a [low single-digit] drop on the day of a potential Aereo win” for Disney, Fox and Comcast/NBC.
In the event of a Aereo loss, the upside for the broadcasters is not as great, it says. The pure plays would go up 12%, while CBS could climb just 6 points.
“[G]iven that the market seems to believe that the chance of Aereo losing is greater than the chance of Aereo winning, there is likely to be more downside risk to stock price performance should Aereo win than there would be potential upside to stock price performance should Aereo lose,” the memo says.
The memo says that the ruling is expected before the court recesses before July 4, but could come sooner, possibly today.
The broadcast networks sued Aereo in March 2012, claiming that its online distribution of local broadcast signals violated the copyrights of their programming.
Since then, the case has worked its way up the Supreme Court. Prior to the April 22 oral arguments, the memo says, its legal experts were giving Aereo a 50% of winning. But based on the questioning from justices during the argument, it says, the experts have reduced Aereo’s chances to below 30%.
Despite the impact on stock prices, the memo also says, the fundamentals of the broadcasting business would not change in the short and medium term in the event of an Aereo win.
“Yes, [long-term] forecasts could change should telecom laws eventually be rewritten and/or broadcast nets alter their business model (straight to cable or two feeds). We just have no clue as to how much or when.”