Analyst: Entertainment Stocks Will ‘Hibernate’ Before Rising in Spring

NEW YORK – Big entertainment stocks are likely to tread water for the first couple of months of 2012, but then rise in spring, Susquehanna International Group analyst Vasily Karasyov suggested on Wednesday, pointing to historical trading patterns.

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In a report entitled “Quiet Please: Media Stocks Are Hibernating 'til Spring,” he said: “Based on our analysis of 16 years of trading data, we think that media stocks will be flattish in the next two months, but up 6 percent by the end of May…There is a pronounced seasonality in media stocks' price performance with a flattish winter, strong spring, a down summer, and an up fall.”

His suggestion for investors: “If 2012 follows this pattern, media stocks will hug the flat line for the next two months before going up in April and May. June is where summer softness starts, so sell in May and go away.”

Karasyov has “neutral” ratings on Walt Disney, AMC Networks, Scripps Networks Interactive and Madison Square Garden, but is “positive” on Time Warner, News Corp., Viacom and Discovery Communications.

In other entertainment industry stock calls on Wednesday, Barrington Research analyst James Goss said he continues to like the stocks of Imax and Sirius XM Radio, keeping them on his company’s “best ideas” list.

He rates both stocks at “outperform” and has a $33 price target on Imax and a $3 target on Sirius.

“Imax offers investors an appealing long‐term growth story as management executes its footprint expansion program both domestically and internationally,” Goss wrote. About Sirius, he said: “We feel upside remains, though not to the degree enjoyed by those willing to take on the significant risk as the stock bounced off the bottom.”

Meanwhile, Sanford C. Bernstein analyst Craig Moffett on Wednesday upgraded his rating on satellite TV giant DirecTV from “market perform” to “outperform” and boosted his price target by $4 to $52.

“Consensus is now sufficiently sober, and valuation is sufficiently compelling, that it's time to take a fresh look,” he explained. “For conservatism, we have lowered our forecasts for U.S. margins and subscribers, and have also lowered our target multiple for the U.S. business to reflect DirecTV U.S.'s diminished longer-term growth prospects. Despite this, at the end of the day, the stock is just too cheap.”
 

Email: Georg.Szalai@thr.com

Twitter: @georgszalai