Media Bear Speaks His Mind

NEW YORK (TheStreet) -- Media conglomerates took some criticism Friday from an analyst skeptical about the degree to which ad spending will recover even if the economy as a whole begins an earnest rebound.

Cowen analyst Doug Creutz downgraded CBS(CBS Quote), Viacom(VIAB Quote) and News Corp.(NWSA Quote), and reduced his earnings forecast for Time Warner(TWX Quote) and Disney(DIS Quote) (though he left his ratings of those latter two unscathed at neutral).

The crux of Creutz's bearish argument rests on the methods investors and analysts use to predict future advertising spending. Some people believe the ad business rises and falls in close allegiance to the GDP. Others think that consumer spending and industrial output are more closely alligned with how advertising spending wanes and waxes.

The two camps, bears vs. bulls, have created an "investment controversy" among media investors, Creutz wrote in a research note.

Creutz is in the former camp, and since he believes that consumer spending will lag the broader GDP measure over the course of the next two years or so, he expects the five companies to struggle -- relative, at least, to market expectations, which have priced a more robust ad recovery into media stocks.

Shares of the five behemoths, which control everything from newspapers to TV networks to film studios to book publishers to record producers, were under pressure Friday, if slightly.

Class A shares of News Corp. -- Creutz cut his rating on them from neutral to underperform -- were trading Friday afternoon at $11.70, up a penny from the previous close. The stock has soared more than 140% from the valley it sank to in March.