Analyst Reduces U.S. Ad Growth Forecast, Remains Bullish on Entertainment Stocks
Barclays' Anthony DiClemente reiterates News Corp. as his favorite sector stock, saying that Hollywood conglomerates continue to trade at attractive prices.
Barclays Capital analyst Anthony DiClemente on Thursday cut his U.S. advertising growth forecast for 2012 and 2013, but reiterated his positive stance on Hollywood conglomerate stocks despite gains over the first nine months of 2012.
He now predicts 4 percent ad growth, down from 4.6 percent in 2012, and 1.9 percent, instead of 2.3 percent, in 2013 due to "the choppy economic data since our last update in April."
He also took down his TV ad estimates saying that "the Olympics had a greater than expected effect on ratings" of networks that didn't carry the Summer Games. DiClemente's national broadcast TV ad growth projection for 2012 moved down from 9.2 percent to 8.6 percent, while his cable TV forecast went from 7.5 percent to 7.2 percent.
But the analyst wrote in a report: "We remain constructive on U.S. advertising as it has been relatively resilient - particularly TV and online advertising - to the cyclical bumps experienced over the last few years."
He highlighted that fourth-quarter TV advertising growth should re-accelerate thanks to easier year-over-year comparisons, political ads and new programming.
DiClemente also said he remains positive on big media stocks overall as the sector "continues to trade at a 27 percent discount to consumer discretionary [stocks] despite faster expected growth."
And he reiterated Rupert Murdoch's News Corp. as his top pick with an "overweight" rating, which is similar to other firms' "buy" rating.
Meanwhile, Sanford C. Bernstein analyst Claudio Aspesi in a Thursday report highlighted ad challenges and new competition for European free-to-air broadcasters.
"Our estimates for advertising revenue growth between 2011 and 2015 for the free-to-air broadcasters in our coverage are materially below the expected TV ad market growth in the respective countries, reflecting the expectation of further share losses," he wrote.
"Pay TV, which is structurally advantaged in the acquisition of content,...drives audience erosion," Aspesi said. And new technologies "provide a daily news flow of further threats."
But overall, he concluded: "TV is unlikely to die, but the economics will likely deteriorate."
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