U.S. media, entertainment shares fall

Amid renewed concerns about the economic recovery

NEW YORK -- Shares of U.S. media and entertainment giants fell Wednesday amid a broader stock market decline driven by renewed concerns about the strength of the economic recovery.

The broad-based S&P 500 stock index finished down 2.8%, with most sector biggies underperforming it. "Those more ad reliant are more cyclically challenged and feared," explained Miller Tabak analyst David Joyce.

Shares of CBS Corp. lost 6.2% to $14.47, News Corp. ended 4.4% lower at $14.83, Sony Corp. shares lost 4.2% to $29.80, Viacom's stock was off by 3.5% at $32.82, and Walt Disney shares traded down 3% to close at $34.22. Time Warner's stock traded at $31.09, down 2.9%. TW is less ad-reliant than others.

Several analysts on Wednesday commented on Disney's better-than-expected quarterly earnings report from Tuesday night.

Miller Tabak analyst David Joyce, for one, reiterated his "buy" rating and $40 price target on the stock, but made an observation that could well apply to other sector biggies as well. Disney stock traded up in Tuesday after-hours, "but the macroeconomic fears of slowing growth may be on the front-burner now that earnings season has ended," he said.

Wunderlich Securities analyst Matthew Harrigan in his investor note on Disney also cited the economy. "Sensitivities relating to the economy and studio creative execution/technology still imply $42 bull and $28 bear cases," he wrote in reiterating his $36 price target.

Barclays Capital analyst Anthony DiClemente highlighted ESPN's 17% year-over-year advertising revenue gain on a normalized basis in the latest quarter. "ESPN impressively grew cable TV advertising the fastest among its peers in the second quarter (even faster than Scripps Networks)," he said. "We believe the fact that ESPN overindexes to automotive advertising helped its outsized growth."

Janney Montgomery Scott analyst Tony Wible also lauded the ESPN figures, but pointed out that Disney management said that scatter ad market prices are pacing up 20% in the current quarter. This is "a slight deceleration from (the previous quarter's) levels," Wible said. "Economic uncertainty also continues to cloud long term visibility."

However, hotel and per-capita guest spending at Disney's theme parks grew solidly. Wible argued this suggests that "elasticity is holding despite economic uncertainty and the lapse of promotions, which is encouraging in light of the recent ticket price increase."
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