NEW YORK (TheStreet) -- Scripps' Networks Interactive's (SNI) most popular channels HGTV, DIY, Food Network were veritable cash cows for years, raking in advertising dollars on consistent ratings. But those days are over.
Scripps's stock is backpedaling, down nearly 11% for the year to date and 1% Monday as television ad revenue declines, leaving investors little reason to own the shares apart from long-running speculation that the company is a takeover target.
Even Scripps' potential for a takeover is waning as the company has been increasing its size with acquisitions like the roughly $656.3 takeover of Poland's TVN, making the Cincinnati-based company a more expensive buy.
"The company's acquisition of a controlling interest in Polish TV operator TVN, could be a negative for the stock," said CLSA Research analyst Vasily Karasyov in a note. The firm has an underperform rating on SNI. "Investors often speculate on Scripps' potential as an acquisition target, and this is reflected in its valuation. If the Street believes the company is no longer a potential target, its valuation multiple could compress."
Last week Scripps reported mixed first-quarter results including revenue of about $658.3 million versus the Street view of $660.9 million, according to Thomson Reuters. First-quarter net income was $123.8 million, down from $128.3 million a year prior with adjusted earnings of $1.02 per share, higher than the Street consensus of 91 cents. SNI retreated about 3% in response.
Like many media companies, Scripps is grappling with a rapidly softening television ad market as its viewerships are collapsing with more consumers turning to digital outlets like Netflix (NFLX) or YouTube. Television ad bookings declined about 6% in the first quarter, although bookings picked up in March, according to the latest data from Standard Media Index. Meanwhile, the overall digital ad market grew 23% during that same time.