Media Stock Massacre Has Disney and Viacom Hitting Lows
Analysts have been weighing in on what might be considered either a bear market or a nasty correction in entertainment-media stocks.
Viacom and Walt Disney shares each touched 52-week lows on Wednesday as Wall Street refuses to believe that cord-cutting amid digital competition from the likes of Amazon.com, Netflix and others is much ado about nothing, no matter what executives at the major media conglomerates say.
Disney, for one, reported absolutely stellar quarterly financials on Tuesday courtesy of Star Wars: The Force Awakens, but on Wednesday the stock dropped 4 percent nonetheless. Since August, when the specter of cord-cutting was brought into renewed focus, Disney shares are down 27 percent.
This came despite the fact that Disney CEO Bob Iger said Tuesday that ESPN actually added subscribers in the most recent quarter, though he wasn't specific and Disney's cable networks on-whole lost subs.
At Viacom, the carnage is far worse. The company reported lackluster quarterly numbers on Monday and Wall Street absolutely punished anyone unlucky enough to be holding onto shares of the conglomerate that runs MTV, BET, Comedy Central and Paramount Pictures.
Viacom stock sunk 3 percent Monday, crashed 21 percent on Tuesday and fell another 4 percent on Wednesday. Just this year, which is only six weeks old, the stock is off 23 percent. Since August, it's A-shares are down 36 percent and B-shares are off 43 percent.
Viacom isn't only dealing with fears over cord-cutting but also a fight over governance, as CEO Philippe Dauman took over as executive chairman after Sumner Redstone stepped down, despite objections from vice chair Shari Redstone and some large investors, the most vocal of which is SpringOwl Asset Management.
After Dauman spoke during a conference call with analysts to discuss earnings, calling those who have been critical of Viacom and his management "naysayers, self-interested critics and publicity seekers," SpringOwl lashed into him.
"This is no way to run a company," SpringOwl said Wednesday. "The stock immediately started to drop on Dauman's comments on the call — and it didn't stop until the closing bell rang."
Beyond activist investors like SpringOwl, Wall Street analysts have been weighing in on what might be considered either a bear market or a nasty correction in entertainment-media stocks.
Michael Morris of Guggenheim Partners, for example, lowered his earnings estimates on Disney citing "sustained lower growth estimates for cable subscription growth."
Barton Crockett of FBR & Co. is actually bullish on Viacom under the assumption the stock can't go much lower. "We retain our 'outperform' rating in the belief that performance either turns around or that a breakup ends the misery," he told clients on Wednesday.
Time Warner, which had been doing better than most of the other media conglomerates due to the perception it is a takeover target, also has been dropping lately. Despite decent earnings reported on Wednesday, the stock fell 5 percent. Its shares are now off 31 percent since August.
"Given rising concerns around the health of pay-TV affiliate revenue growth reported by Disney and Viacom yesterday — investors are particularly nervous about Time Warner's subscription revenues, which came in light," said Benjamin Swinburne of Morgan Stanley.
Here's a look at the mauling the major media companies have suffered since August:
Viacom closed Wednesday at $35.15, down 36 percent;
Time Warner closed Wednesday at $60.07, down 31 percent;
21st Century Fox closed Wednesday at $24.33, down 29 percent;
Disney closed Wednesday at $88.85, down 27 percent;
Sony closed Wednesday at 20.80, down 25 percent;
CBS closed Wednesday at $42.88, down 19 percent;
Comcast closed Wednesday at $55.81, down 11 percent.