This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Viacom the One to Beat in Big Entertainment

NEW YORK (TheStreet) -- Media stocks are trading at historic highs but that isn't keeping sell-side analysts away from encouraging investors to continue buying shares in the world's largest entertainment companies.

Rupert Murdoch's 21st Century Fox (FOXA - Get Report) is trading at nearly 25 times reported earnings, its highest level since December 2009. That comes, as Walt Disney (DIS - Get Report), owner of ABC and ESPN and a formidable children's television and movie business, trades at 22.5 times earnings, its highest level since June 2006.

Regardless of the gains made by Fox, Disney, Time Warner (TWX - Get Report) and Viacom (VIA - Get Report) in 2013, sell-side analysts continue to forecast further upside. Fox, for instance, holds a "buy" rating, or its equivalent, from 26 Wall Street analysts compared to five holds and one sell, according to data compiled by Bloomberg. It's unlikely Fox will advance 43% in 2014 as it did last year, or Viacom gaining 67%, but these businesses remains sufficiently vibrant to sustain a largely positive outlook. 

The strength of the four large U.S. multi-platformed entertainment companies is largely due to the outlook for revenue growth from pay-TV carriage fees and a rebounding advertising market. All four companies, as opposed to Sony Corp. (SNE), have mostly figured out how to make fewer movies and lower the risk of losing millions on a box office flop while leaving room for pleasant surprises and blockbusters. So, even as Netflix (NFLX) continues to put pressure on the pay-TV bundle, content, rather than cable-lines, continues to dictate the economics of the media business.

If you're holding large-cap media stocks, the question boils down to which of the four stock you ought to own. For Anthony Wible, media and entertainment analyst and a managing director at Janney Montgomery Scott, the answer is Viacom. MTV and Nickelodeon, Wible says, are likely to proliferate as well or better than other media properties on mobile devices. "Money is going to rotate to the platforms and brands that have great second-screen exposure," Wible said. The MTV Music Awards is among the most socially-engaged television events of the year.

Disney, Wible points out, will be making the transition to a higher-costing deal with the National Football League in 2014 while Time Warner's strengths aren't nearly as untapped as Viacom, Wible adds. Time Warner will benefit from higher affiliate fees later in 2014 but that's already well appreciated by investors. Meanwhile, CEO Jeff Bewkes still has work to do to correct problems and lower the debt load at Central European Media Enterprises, of which it owns a 49% stake. 

Meanwhile, Viacom has created a spin-off of Dora The Explorer for pre-schoolers, called Dora And Friends, which Dauman says will create new opportunities for licensed products while expanding Nickelodeon's reach into emerging markets. Viacom is also creating scripted shows for MTV and Spike. 

Apart from the viability of Viacom's MTV and Nickelodeon to flourish on mobile, Viacom CEO Philippe Dauman also continues to direct a large amount of cash flow relative to the company's $38.9 billion market cap toward buying back the New York-based company's shares. 

Viacom was slipping 0.5% to $86.51 in midday trading.

--Written by Leon Lazaroff in New York.

>Contact by Email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
CMCSA $59.38 0.00%
DIS $104.08 0.00%
FOXA $35.00 0.00%
VIA $70.22 0.00%
TWX $81.86 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs