New Bernstein Analyst Favors Disney, Discovery as He Launches Entertainment Stocks Coverage

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Affiliate fees, international and home video will have a greater impact on stocks of sector giants than digital licensing, predicts Todd Juenger who expects Time Warner to underperform.

NEW YORK - New Sanford C. Bernstein analyst Todd Juenger has initiated coverage of big U.S. entertainment stocks, with Walt Disney and Discovery Communications getting the most bullish reviews and "outperform" ratings from him.

His initiation report, entitled "A Funny Thing Happened on the Way to the Graveyard...," Juenger also started Time Warner shares with an "underperform" rating and the stocks of Viacom, CBS Corp. and News Corp. with "market-perform" ratings.

"Upside from digital channels has dominated the conversation on media stocks," he said. "We believe affiliate fees, international and home video will have greater impact, and, along with digital licensing, will drive divergence in performance among large cap media."

Juenger said he likes Discovery due to a "conversion of affiliate fees into earnings growth and international pay TV operating leverage."

Disney, meanwhile, should see its stock benefit from affiliate fee growth, international gains, "relative" home video resilience and "organic growth projects not priced in the stock," he argued.

Meanwhile, Juenger said "we rate TW "underperform," believing it will lag due to margin pressure at its general entertainment networks, subscription VOD threat to Turner and HBO, tough theatrical comparisons and non-growth publishing assets."


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