Analyst Downgrades Time Warner, Citing Stock's Strong Recent Run-Up

7:21 AM PST 01/30/2012 by Georg Szalai
Michael Loccisano/Getty Images

Barclays Capital's Anthony DiClemente cuts his rating to "equal weight" amid a 21 percent stock gain since September and cites tough film comparisons and TV ratings challenges for the conglomerate led by CEO Jeffrey Bewkes.

NEW YORK - Time Warner's stock has had a strong run since the fall, leading Barclays Capital analyst Anthony DiClemente on Monday to downgrade his rating on it to "equal weight," similar to other Wall Street observers' "neutral" rating, from "overweight."

"Since Sept. 1, TW shares are up 21 percent, versus the S&P 500 up 9 percent, nearly reaching our 12-month price target of $38 more quickly than we anticipated," DiClemente wrote in a report.

Among challenges for the company, led by chairman and CEO Jeffrey Bewkes, he cited "tough comparisons" for the conglomerate's film unit in 2012 after Warner Bros. reported its best-ever film quarter in the third quarter. "We are concerned that an impressive 2011 will lead to a very difficult set of comparisons for the segment in 2012, especially since box office trends have slowed and physical DVD sales continue to decline steadily," DiClemente said.

He also highlighted that ratings trends at its TV networks have been "mixed." "After the addition of The Big Bang Theory to its primetime schedule, TBS ratings trends have improved solidly and are up 2 percent in the first quarter," the analyst highlighted. "However, we are concerned that Big Bang may only be a temporary solution and could lose momentum after subsequent viewings of the initial episode cycles."

Plus, at TNT, ratings are down 19 percent in the current quarter "despite an uplift from the return of the NBA," DiClemente pointed out.

He recently mentioned one potential catalyst for the stock - "the possibility of a large-scale streaming deal for Warner Bros. content which could act as a potential catalyst for earnings." While such a deal is still possible, according to DiClemente, he warned that "given TW shares' recent upward move, we believe the impact of such a transaction is likely priced in at current levels."

As of 10:25am ET, TW's stock was down 1.7 percent at $36.92. Over the past year, the stock has traded between $27.62 and $38.62.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

 

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