Another Tough Week For Media Stocks Amid Global Market Rout
August 21 2015 - 5:42PM
Dow Jones News
By Nathalie Tadena
In a tumultuous week for global markets, media stocks weren't
spared from investors' jitters, adding to an already dismal August
for the industry.
Stocks around the world plunged and the Dow entered correction
territory this week on signs of a slowdown in China's economy,
lackluster global growth and falling commodity prices.
Media stocks were no exception to the market rout. Shares across
the industry have been dropping for more than just this week, ever
since earnings reports earlier this month revealed that the threat
to traditional TV businesses of consumers cutting the cord or
downgrading to skinnier pay-TV bundles may be even more dire than
previously thought. The sector lost more than $50 billion in market
value during a massive two-day stock sell-off earlier this
month.
Media shares took an added punch on Thursday after Bernstein
analysts released a scathing report questioning the resilience of
the TV industry in an age where TV advertising is "undeniably in
secular decline" and even affiliate fee revenue is at risk.
"On a recent sleepless night, we had this epiphany: the market
is now valuing U.S. ad-supported TV businesses as structurally
impaired assets," Bernstein analyst Todd Juenger wrote. Mr.
Juenger, calling for a new framework to value the media sector,
downgraded his ratings on Walt Disney Co., which owns ESPN and ABC,
and Time Warner, parent of CNN and TBS, to "market-perform."
This week, shares of Disney and Time Warner fell 7.8% and 7.1%,
respectively. Viacom, the owner of MTV, suffered an 8.7% stock
decline, while 21st Century Fox's stock fell 7.7% for the week.
Netflix shares slumped 16%.
In comparison, the S&P 500 fell 5.8% this week while the
S&P 500 Media Index is off 5.9%.
Advertising stocks, such as Omnicom and Interpublic, have also
underperformed the broader market this week. Since last Friday's
close, Omnicom shares are down 6.3%, while Interpublic's shares are
off 7.3%.
Still, ad holding companies have been relatively more stable
amid the media meltdown this month because they offer diversified
services and are adept at managing costs, Macquarie analyst Tim
Nollen wrote in a research note Friday. Omnicom and Interpublic
have each won considerable new business so far this year and
further account wins "could provide support if markets fall
further," he wrote.
Mr. Nollen's report noted TV stocks have fallen an average of
19% in August while Omnicom and Interpublic have together fallen
4%.
"We view the ad agency groups increasingly as business services
and organizations that handle broadening client mandates across
marketing, data and technology," Mr. Nollen said. "They are
media-neutral--if TV ads shift to digital, agencies are handling
that creative and media work and even gaining from more fee
volume."
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(END) Dow Jones Newswires
August 21, 2015 17:27 ET (21:27 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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