(Story updated to add JPMorgan Chase initiated coverage of Lions Gate Entertainment Tuesday with an "overweight" rating .)
) -- The movie business is a crap shoot. Witness the handwringing over the expected $200 million bath
is expected to take on its big-budget box-office flop "John Carter" that opened this week.
Most studios, Disney's included, now rely on their deep-pocketed, conglomerate parents for an allowance so they can continue to be free to gamble on making their next big franchise hit, which in Disney's case includes "Pirates of the Carribbean," now in development for the fifth film in the series.
And just witness the "Harry Potter" sequels that keep on giving to producer and distributor Warner Bros. parent
, in the form of billions from film sequels to DVD sales, books and related consumer products. But Time Warner's most reliable income sources are its Turner and HBO network broadcast businesses.
So the studios will keep on trying, but the media industry isn't quite the big risk it was only a few years ago, as blockbuster movies are more the frosting on the cake for these companies, since their broadcast industry cash flow has allowed most to build themselves up into conglomerates where losses in one sector can be offset by gains elsewhere.
Disney is a prime example. Referred to by insiders as the "mouse house," for its Mickey Mouse "franchise," identity, it's really a corporate octopus, with its tentacles in businesses ranging from its famous theme parks and movies, to cruise ships, radio and cable network programming, and the ESPN sports network.
One of the few remaining firms where write-offs from a failure hurts for more than one fiscal quarter is
Lions Gate Entertainment
, which gets a significant amount of revenue from its films, although it also creates content for other venues. It's eagerly anticipating the release this weekend of its highly rated "The Hunger Games," because it will help it pay for its recent acquisition of Summit Entertainment, producer and owner of the hugely successful "Twilight" series of vampire films.
Although share-price returns for the leading media companies are relatively modest this year, the world's insatiable appetite for entertainment in all forms should keep the leaders in good stead long term, at least according to analysts, who give mostly positive ratings to these companies, based on their earnings prospects.
Here's a look
in descending order of market value:
Dreamworks, with a market value of $1.6 billion, develops animated feature films, television specials and series, online virtual worlds, and related consumer products. Among its most successful computer-generated animated creations are the "Shrek," "Madagascar," "Kung Fu Panda," and "Shark Tale" franchises.
Its shares are up 13% this year, but over three-years, have an average annual loss of 3%. Analysts give its shares two "buy" ratings, six "holds," three "weak holds," and four "sells," according to a survey of analysts by S&P.S&P has it rated "strong buy," with a $25 price target, which is a 37% premium to the current price. Its analyst likes it because of the success of the firm's 3D and home video releases and a new joint venture in China, opening up the world's largest video market. It also has "no debt and nearly $1.40 per share in cash," which "could make for an attractive takeover candidate."
Lions Gate Entertainment
Lions Gate, with a market value of just under $2 billion, is a film entertainment studio producing for movies, television, home entertainment, and digitally delivered content. It bought Summit Entertainment for $412 million in January.
Its shares are up 84% this year and have a three-year, average annual return of 43%. Analysts give its shares four "buy" ratings, two "buy/holds," and two "holds," according to a survey of analysts by S&P. For fiscal year 2012, analysts estimate it will earn 9 cents per share and that will grow to $1.11 in 2013. A blockbuster or a flop can make a big difference in this company's share price and the early buzz is that the company is likely to see huge profits with the release this coming weekend of "The Hunger Games." Its shares are up 11.5% in the past week and 27% in the past month.
initiated coverage of Lions Gate Entertainment Tuesday with an "overweight" rating, citing the company's popular franchises, growing television business and strong free cash flow as particular positives.
Discovery, with a market value of $12 billion, produces and owns a unique library of televised content and outlets, including the Discovery Channel, TLC (The Learning Channel), Animal Planet, Investigation Discovery, and 50% interests in OWN, Oprah Winfrey's new cable channel and The Hub, a children's network.
Its shares are up 16% this year and have a three-year, average annual return of 44%. Analysts give its shares five "buy" ratings, six "buy/holds," and 15 "holds," according to a survey of analysts by S&P. S&P has it rated "buy" with a $52 price target, which is an 8% premium to the current price. Analysts estimate it will earn $2.76 per share this year and $3.30 in 2013, a 20% rise in earnings. Morningstar analysts say "Discovery Channel is the most widely distributed brand in the world, reaching more than 200 countries," and the company's long-term growth "will be driven by expansion in international markets as pay-television penetration is well below 50% in countries such as Brazil and Australia."
CBS, with a market value of $21 billion, is made up of the CBS' television network, 30 local TV stations, and 50% of CW, a joint venture between CBS and Time Warner. The company also owns the Showtime network, CBS Radio, CBS Outdoor advertising, and the book publisher Simon & Schuster, while its King World Productions owns syndicated TV shows such as "Jeopardy" and "Wheel of Fortune."
Its shares are up 17% this year. Analysts give its shares 12 "buy" ratings, nine "buy/holds," seven "holds," and one "weak hold," according to a survey of analysts by S&P. S&P has it rated "strong buy," with a $35 price target, which is about an 11% premium to the current price. Analysts estimate it will earn $2.36 per share this year and that will grow by 14% to $2.69 per share in 2013. S&P has a "strong buy" rating, with a $35 price target, which is an 11% premium to the current price. S&P analysts say it's been helped by a rebound in advertising revenue as the economy recovers, as well as the strong performance of its syndicated properties.
Viacom, with a market value of $23 billion, is an international media company. Its portfolio includes cable network properties, such as Nickelodeon, MTV, BET, Comedy Central, VH1, Country Music Television, and Spike TV. It also owns Paramount Pictures which produces motion pictures and owns a library of 2,500 films.
Its shares are up 5.5% this year and have a three-year, average annual return of 44%. Analysts give its shares 13 "buy" ratings, 11 "buy/holds," and 10 "holds," according to a survey of analysts by S&P. S&P has it rated "strong buy," with a price target of $55, a 16% premium to the current price. Its analysts like Viacom's upcoming film slate, which includes a re-release of its blockbuster "Titanic,", but this time in 3D, and franchise sequels for "GI Joe," "Madagascar," "Paranormal Activity,"and "Star Trek". And they add that "We see ample financial flexibility for ramped-up share buybacks."
Time Warner, with a market value of $35 billion, owns television networks, including HBO/Cinemax, CNN, and TNT, and its film unit creates and distributes both movies and television programming as one of the world's largest filmmakers under the Warner Bros. and New Line Cinema names. It also has a publishing unit that includes magazines such as
Its shares are down 0.6% % this year and have a three-year, average annual return of 33%. Analysts give its shares 11 "buy" ratings, 12 "buy/holds," nine "holds," and one "weak hold," according to a survey of analysts by S&P. Those analysts expect it to earn $3.20 per share this year and $3.64 in 2013. S&P has it rated "buy" with a $45 price target which is a 25% premium to the current price. The company spent about $5.6 billion on share buybacks and dividends last year and has authorized another $4 billion in share repurchases for this year.
News Corp., with a market value of $50 billion, is a media conglomerate that owns a film production company, television networks, including the Fox broadcast network, 27 local TV stations, cable network programming, direct-broadcast satellite television including BSkyB, and a publishing arm, which owns newspapers in Australia, the U.K., and the U.S. among them,
The Wall Street Journal
Its shares are up 11% this year and have a three-year, average annual return of 44%. Analysts give its shares four "buy/holds," and one "hold," according to a survey of analysts by S&P. S&P has it rated "buy," with a $24 price target, which is an 18% premium to the current price. Morningstar analyst Michael Corty writes in a research note, that "the company is well positioned with a strong collection of global cable networks. We think the stock is fairly valued after an impressive run since the phone hacking scandal came to light in the summer. Clearly, the violations at (the U.K.'s)
News of the World
are unfortunate and embarrassing, but they have no impact on the long-term value of the firm" and he notes that the company "continues to buy back shares at a rapid pace."
Disney, with a market value of $78 billion, is a media and entertainment conglomerate with international operations in theme parks, filmed entertainment, television broadcasting and merchandise licensing. Morningstar says "Disney's ability to monetize its characters and franchises across multiple platforms--movies, home video sales, merchandising, and theme parks--is unparalleled in the media industry."
Its shares are up 15% this year and have a three-year, average annual return of 37%. Analysts give its shares 11 "buy" ratings, eight "buy/holds," and 13 "holds," according to a survey of analysts by S&P. Morningstar says that "Disney owns a collection of valuable assets, but its media networks, (which include ESPN, ABC, ABC Family, and the Disney Channel) generate more than half of the company's operating profit, and are the backbone of this conglomerate." S&P has it rated "strong buy," with a $48 price target, which is roughly an 11% premium to the current price.
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