Sinclair Stock Outperforming Most Major Media Rivals This Year

Wall Street - Getty - H 2019

At the midway point of 2019, the conglomerate's stock is up an impressive 106 percent, besting all of the major media companies.

Amid the hype over streaming wars and blockbuster mergers — both real and potential — Sinclair Broadcast Group is quietly delivering for shareholders as the owner of TV stations best known for a news division that leans conservative also becomes a powerhouse in sports.

At the midway point of 2019, Sinclair stock is up an impressive 106 percent, besting all of the major media companies. Much of the surge is owed to a deal to purchase for $9.6 billion a bunch of regional sports stations from Walt Disney that the latter acquired when it purchased most of 21st Century Fox from Rupert Murdoch.

From Disney, Sinclair is acquiring channels that feature games from more than 40 NBA, NHL and MLB teams, plus the Fox College Sports channel. Sinclair already owns smaller sports channels like Stadium (sports highlights), Tennis Channel, Rings of Honor Wrestling, Marquee Sports Network (launching in 2020) and local stations that carry high school sports.

Sinclair also competes on several local levels with Fox News Channel and, in fact, it has been hiring talent that once worked at the leader in conservative news, including Eric Bolling and James Rosen. It also employs former White House advisor Sebastian Gorka and former CBS News anchor Sharyl Attkisson.

Sinclair is beating out not only the major media conglomerates but most of the high-flying new-media companies even as the streaming wars and potential deal activity significantly heat up. Netflix, for example, is up 37 percent, Amazon is up 26 percent, Apple is up 27 percent, Facebook is up 47 percent and Twitter is up 21 percent.

At the halfway mark of 2019, only two of the 50 stocks tracked by The Hollywood Reporter are outperforming Sinclair: Snap, the parent of Snapchat, is up 160 percent, and the streamer Roku is up 196 percent.

Of those 50 stocks, just six are down on the year and most have handily outperformed the broader market year-to-date, with the S&P 500 up 17 percent so far this year, practically a record-setting pace.

Among the major media companies, Disney is up 27 percent, Comcast (parent of NBCUniversal) is up 25 percent, Sony is up 9 percent, AT&T (parent of WarnerMedia) is up 21 percent, Viacom is up 18 percent and CBS is up 15 percent. Murdoch's Fox Corporation, made up of the assets Disney didn't purchase, most notably Fox News, is down 23 percent.

Disney is set to compete with Netflix in November when it launches Disney+ and WarnerMedia will follow suit, as will NBCUniversal and Apple.

When it comes to Comcast, meanwhile, Wall Street has become more comfortable with the benefits of the $39 billion acquisition of the Sky satellite TV service. Macquarie Capital analyst Tim Nollen has an "outperform" rating on the stock and recently wrote in a report: "We view Comcast as a best-in-class operator."

Murdoch's new Fox only started trading in March and Nollen, in a report following the company's investor day in May, maintained his "neutral" rating, highlighting that management "laid out a bullish vision for the company’s simple operating model based on live event programming — 70 percent of its content is news and sports."

MoffettNathanson in early June cut its price target on Fox's stock by $8 to $42, while it ended the half-year at $36.64. It reiterated its "buy" recommendation, though, suggesting that the stock is simply too cheap.

Among other key sector powerhouses, two with John Malone ownership have gone in different directions this year. Discovery's stock has run up 24 percent as analysts have lauded the lifestyle media company for gaining more carriage on newer digital services, while Lionsgate has lost 22 percent of its market value to trade near all-time lows.

"Lionsgate is making moves to clarify its strategy and realize value in its assets, after a fiscal year marked by declining revenue for the second straight year, and an effective guide-down" for the latest fiscal year, Nollen wrote in a recent report.

Deals could be a big part of Lionsgate's future, Wall Street believes. The company could "realize value through an equity stake sale in Starzplay International, which it is currently seeking, or through a deal with CBS to acquire all of Starz, which itself is complicated by the ongoing debate within CBS about how it might merge with Viacom, as both are controlled by Shari Redstone and her father, Sumner."

Nollen pondered recently "what a stand-alone Lionsgate would do, if it remained a sub-scale studio business or would become a target or acquirer of other media assets."

As for CBS combining with Viacom, some consider it only a matter of time.

"With larger media companies like Disney and WarnerMedia focused on direct-to-consumer, the enhanced scale of a combined CBS-Viacom improves the long-term potential and viability of these traditional media companies," says Patrice Cucinello of Fitch Ratings. "Content is still king and it will become increasingly important to DTC growth.

It's a mixed bag for video gamers so far this year, with Electronic Arts up 28 percent, Activision Blizzard up just 2 percent and Take-Two Interactive Software up 10 percent. Zynga, the maker of Words With Friends, is up 56 percent.

Where is Wall Street focusing its bets at the mid-year point?

CFRA Research analyst Tuna Amobi has "strong buy" ratings on Disney and Comcast, the former for its "robust franchise pipeline, multiplatform opportunities, potential upside on the Fox acquisition and upcoming launch of Disney+," he tells THR. For Comcast, he cites such opportunities as "vertical economies of scale and enhanced diversification — business and geographic — on the Sky acquisition."

And several analysts are bullish about shares of both CBS and Viacom, assuming that the two will merge.