Lehman Brothers analyst Stuart Linde initiated coverage on the entertainment sector in a note to investors, titled "It's Show Time: Positive on Entertainment Sector." That pretty much sums up the whole note, in which Linde started coverage on five companies.
"We believe these companies offer investors a safe haven," he wrote. "Stick with companies that can leverage their brands across multiple platforms and operate low capital expenditure business models."
Linde said that the companies' limited exposure to the advertising market plus growth in entertainment spending would them some recession resistant. The following companies were initiated by Lehman:
- Crown Media Holdings (CRWN) was started at strong buy with a $27 price target. Linde said he liked Crown's family-themed content and estimated that the company could break even in 2003 with subscriber growth would expand by double-digits until 2005.
Walt Disney's (DIS) - Get Walt Disney Company Report broadcasting holdings and the affect slowing gross domestic product growth would have on theme park revenues, Lehman started the blue-chip at buy with a $34 price target. That said, Linde was pleased with the company's five-year outlook, citing strong DVD sales and a rejuvenated theme park division.
Liberty Media Group (LMGA) was named a top pick and started at strong buy. "Liberty is well positioned to participate in the media sector resurgence we foresee over the next 12 months through its portfolio of programming, cable and technology assets," the analyst wrote.
Six Flags (PKS) , the theme park people, was started at strong buy, unlike amusement rival Disney. Given a price target of $28, the company was called a "pre-eminent out-of-home entertainment brand that is recession resistant" by Linde, who said that regional theme parks outperform destination parks when the economy cools.
Viacom (VIA.B) was called a top pick, started at strong buy and given a price target of $74 due to its outstanding growth prospects. Earnings growth is expected to come in at 20% annually for the next three years, while free cash flow grows by 25% through 2002 -- giving Viacom an superior edge on competitors. "Viacom is the only media company with dominant positions in every industry segment -- cable, television, radio and outdoor and film production," Linde wrote. "This creates leverage over advertisers and the upper hand over competitors."