Analyst: Big Media Stocks 'More Attractive' Amid Japan, Mideast Concerns
NEW YORK - The ripple effects of the earthquake in Japan, unrest in the Middle East and inflation fears have weighed on stock markets, but stocks of entertainment giants look attractive and could be a safe haven for investors amid all these concerns, according to a Wall Street analyst.
In a report entitled "Big Media More Attractive Amid Negative Headlines," Janney Montgomery Scott's Tony Wible said Friday that "all three factors have little direct impact" on sector giants. Their stocks are also attractive, because they are trading below historical averages, he argued.
Walt Disney, which Wible rates at "neutral," is most exposed to the effects of current events, but "buy"-rated Time Warner and Viacom have limited exposure, he argued.
For example, Wible pointed out that Japan overall only accounts for about 5 percent of studio boxoffice receipts - with Disney's exposure above those of fellow sector giants - and while there may be disruption in Blu-ray shipments from Japan, there are production locations in other locations as well.
Meanwhile, entertainment conglomerates' "majority of costs are tied to labor and ad rates, not oil," plus media giants "have historically been able to pass inflation costs onto consumers and could see additional benefit if prices continue to rise," the analyst said.
Disney faces a bigger risk than its peers "as its parks segment receives revenue from Japan [via royalties from Tokyo Disneyland], and oil can influence park attendance and cost," Wible explained.
His conclusion: "media looks attractive." Said Wible: "Along with limited exposure to the threats discussed, Disney, Time Warner and Viacom all pay out healthy dividends, have robust balance sheets and are currently trading below historical averages."