Report: Media Stocks In 2009 A 'Mixed Bag'
July 1, 2009 at 5:13 AM (PT)
It's been a roller-coaster ride for media and entertainment stocks in 2009, writes THE HOLLYWOOD REPORTER, "making for a mixed bag at the mid-year mark as far as the industry's stock market success goes. But most sector conglomerates, except for TIME WARNER and CBS CORP., are up year-to-date thanks in large part to a market-beating run-up from lows hit in early MARCH amid signs of a bottom in the economic downturn.
"However, that bounce has left WALL STREET wondering whether some of the big entertainment stocks have gained more than is warranted given what is expected to be a drawn-out economic and advertising market recovery. Many look for the latest quarterly earnings season, which starts this month, to provide a better feel for where ad trends stand after first-quarter conference calls saw most CEOs at sector biggies talking about an ad stabilization.
"One thing is for sure, though: SIRIUS XM shares are the biggest gainer in the broader space year-to-date, ending the first half of 2009 up by a triple-digit percentage count. The performance compares to a 1.8% gain in the broad-based S&P 500 index and a 3.8% decline in the DOW. Among entertainment congloms, shares of VIACOM (+19%), SONY (+19%) and NEWS CORP. (+12%) fared best in the first six months of 2009. WALT DISNEY is up slightly for the year, while TIME WARNER (-7%) and CBS CORP. (-14%) lagged their peers.
"Most experts think there is only upside for media and entertainment biggies -- with some conditions. 'Yes, there is upside, but the companies have to prove themselves now,' MILLER TABAK analyst DAVID JOYCE said. 'The companies have to show investors the money -- improve the advertising revenue comps and margins -- now that investors have shown the media companies the money again" in the form of the bounce since early MARCH.'
"JOYCE only expects modest ad improvements in the second-quarter earnings. 'If, say, a TV station group had revenue down 30% in the first quarter, they might be down 27% in second quarter,' he said.
"HAL VOGEL, Pres. of VOGEL CAPITAL MANAGEMENT and a former analyst, remains bearish on sector stocks, though. Asked if there is more upside for them in the back half of 2009, he said, 'No, not really much, if any -- maybe another 5% at best.' He expects a renewed decline after that.
"The ad picture will remain key for ad-dependent stocks like CBS, which ended the first half on a low note TUESDAY as DEUTSCHE BANK analyst DOUG MITCHELSON cut his earnings estimates for the second quarter, citing an unlikely real ad boost near-term amid expectations for a slow recovery."