Warner Bros. Discovery probably won’t see a transformative M&A deal this year — and given negative trends in its TV and streaming businesses, Wells Fargo analysts issued a downgrade on the media conglomerate’s stock. Wells Fargo on Monday downgraded its rating on WBD stock from Equal Weight from Overweight and trimmed its price target from $16 to $12 per share. Shares of Warner Bros. Discovery were trading down 2.4% Monday, at about $10.36/share.
Big TV station groups continue to see the greatest downside with affiliate revenue as a result of more pay TV cord-cutting, a Wells Fargo report says. According to the report, fewer pay TV subscribers — including in the most recent quarterly period — will eventually mean less affiliate revenue, especially for big, independently owned TV station companies. “We think the third quarter reiterates the weakness in some of our companies due to their high exposure to pay TV decline,” writes Steven Cahall, Wells Fargomedia analyst.
Wells Fargo analyst Steven Cahall downgraded Fox Corp. stock to “underweight” from “equal weight” as lower ratings at Fox News Channel and cord-cutting threaten to depress earnings. Cahall lowered his target price for Fox stock to $31 a share from his previous $35 a share target and Friday’s close of $31.92. According to Cahall, FNC accounts for about 80% of Fox Corp.’s earnings.
The arrangement integrates Wells Fargo Credit Cards into NBCUniversal’s One Platform Commerce, providing exclusive benefits for Wells Fargo credit cardholders and shoppable content across Bravo’s Project Runway, Today’s “Jill’s Steals and Deals” and “Shark Tank” on CNBC.
Warner Bros. Discovery received stock upgrades from two media analyst firms Friday for, among other things, making the decision to tie bonuses for CEO David Zaslav and his team to free cash flow performance. “We threw everything and the kitchen sink at a Downside Case scenario for WBD, and it still delevers to 3x by ’25E,” Wells Fargo analysts wrote in a research note published Friday, in which they upgraded WBD’s stock to “overweight” with a price target increase from $13 to $20 per share. “We now have conviction in FCF to limit downside, while the stock has asymmetric upside.”
According to Wells Fargo’s Steven Cahall, Disney selling Hulu is no longer just an alternative counter-theory, existing on the outer fringes of the broader, rampant forward-looking speculation regarding Hulu’s fate. It’s evolved into a mainstream thesis. “Ask 10 investors if they think Disney will sell Hulu, and we think ~7 will answer, ‘yes,'” Cahall wrote in a Wednesday morning investor note.
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“We think Bob Iger is returning to Disney to make big changes. Spinning [off] ESPN/ABC is the best path forward, and we see it as a reasonably probable late-’23 event.” Wells Fargo analyst Steven Cahall opened a Tuesday report on The Walt Disney Co., led again by Iger as CEO, with a big call that is certain to cause debate.
Wells Fargo media analyst Steven Cahall, a long-time Comcast bear, upgraded the cable company but cited growing problems at its NBCUniversal unit as tough times hit the media business. “We’re more aggressively cutting numbers at NBCU to bake in 7% annual sub declines, weakness in entertainment scatter ad pricing and peak losses at Peacock,” he said in a report.
Wells Fargo analyst Steven Cahall has issued his second downgrade for Paramount Global in less than a month, rating the company’s shares as “underweight” and cutting his stock price target from $19 to $13. In his earlier Paramount downgrade on Oct. 4, Cahall slashed his price target from $40 a share to $19, noting that Wells Fargo had become “increasingly worried about the linear ecosystem cross media.”
Linear TV ad revenue and pricing — until now largely immune to cord-cutting and the shift of viewers to streaming — is getting close to a tipping point with Netflix and Disney Plus entering the ad-supported video business, Wells Fargo Securities media analyst Steven Cahall says in a new report.
The deterioration of the traditional TV business is eating into Wall Street’s enthusiasm for media companies as they transition to streaming. Wells Fargo media analyst Steven Cahall on Tuesday (October 4) downgraded Paramount Global stock to equal weight from overweight and chopped his price target for Paramount shares from $40 to $19. Paramount shares closed at $19.62 on Monday. In mid-day trading Tuesday, the stock was up to $20.
“Disney+ is now at a $150 billion discount to Netflix based on our deconstruction, so we’re aggressive buyers,” Wells Fargo’s Steven Cahall said however.
Wells Fargo media analyst Steven Cahall told clients Tuesday that he believes Sinclair Broadcast Group’s regional sports networks could face a “tumultuous” period over the next few months, as uncertainty mounts concerning its upcoming carriage renewal with Dish Network and its ongoing battle with streamers YouTube TV and Hulu Live.
Wells Fargo Securities media analyst Steven Cahall initiated coverage of the cable distribution sector on Tuesday, citing the businesses’ strength in broadband service, but joining the growing chorus of analysts calling for Comcast to spin off its NBCUniversal programming unit. Cahall, who already covers cable programmers, initiated the sector with an “overweight” rating on Cable One and Charter; “equal weight” for Altice USA and “underweight” for Comcast.
“Smaller-scale services like Starz and AMC Networks’ might be better off folded into larger platforms,” writes Wells Fargo’s Steven Cahall.
The Walls Fargo analyst reaffirms her Outperform rating for the station group’s stock with a target of $85. “We could not be more bullish,” she writes to clients. “In our view, this mgmt. team is doing everything right — in terms of capital allocation, M&A strategy, core operations, you name it.”
After meeting with Scripps’ top manager yesterday, Marci Ryvicker and her team of Wells Fargo analysts sounded all positive notes in a report to clients. “We get the sense that business is trending better than the market would suggest,” they say.
That number represents a margin of 40% but significant growth of 8% annually. It is also looking at net retrans comprising 54% of EBITDA come 2021 (vs. 46% in ’17).
The securities research unit says the FCC incentive auction of broadcast spectrum is likely heading into more stages after the opening day forward auction in Stage 1 yielded just $8.5 billion in bids. The FCC needs $88.5 billion to cover the offers it made to broadcasters for the spectrum on the block and to cover associated administrative costs. “We still stick with our original analysis, which says that the forward auction will ultimately net anywhere between $27 billion and 38 billion,” it says.
Wells Fargo analysts Marci Ryvicker and Jennifer Fritzsche address questions as the FCC’s “forward” portion of its incentive auction approaches.
The proposed next-gen TV standard is endorsed by Wells Fargo securities analyst Marci Ryvicker and her S&P Global panelists: Sinclair’s David Amy and Nexstar’s Perry Sook. Said Ryvicker: “For me, I only see it as a good thing. I can’t put a cash flow on it. I can’t put a multiple on it. I just know it’s better than staying at 1.0.” Amy: “It will forever change the way viewers consume our product.” Sook said he was especially interested in the potential for datacasting.
Wells Fargo Securities says that Scripps, Gray and Tegna have the most to gain in political revenue this year from the expansion of presidential battleground states and the “hot” Senate, House and gubernatorial races.
Securities analysts led by Marci Ryvickers tell investors that following a meeting with the FCC, their earlier concerns over what the commission would do about sharing agreements have been allayed, and upgraded TV station group stocks to outperform.
Wells Fargo analyst Marci Ryvicker is raising her estimates for political ad spending from $4.9 billion to $5.2 billion. She upped her forecast based on television spending in August, which surged 77% on local TV to more than $171 million, compared to July. Local, network and cable TV are set to bring in $3.37 billion this election, boosting television revenue by more than 23% compared to last year. Local TV, at 54%, has the largest share of the three segments and is estimated to come in at $2.8 billion.
