As the Olympics continue in Rio next week, Wall Street analysts are keeping an eye on the Games' effects on stocks. The Olympics touch a wide range of sectors, with telecom giants losing ad sales, restaurants experiencing softer spending when customers stay home to watch TV, and even biotech companies hoping the highly publicized Zika virus outbreak will spur sales.
Here's a look at some of the companies that analysts think have been, or will be, impacted by the Olympics.
Comcast's (CMCSA) NBC airs the Games on TV, and Credit Suisse analyst Omar Sheikh highlights Rio's profitability relative to London. "Management highlighted that the company made around $120m from the London Olympics in 2012, and that they expect 'a make lot more than that' in Rio, thanks to better aligned time zones with the United States, expanded coverage (including live-streaming), and faster advertising sales progress ahead of the event."
CBS parent Viacom (V) is accordingly taking a hit as its rival NBC gains. "Near-term numbers are hit by more losses at Paramount, weaker ad sales (Olympics), and SVOD deal uncertainty," wrote analyst Tony Wible of Drexel Hamilton. Daniel Salmon of BMO Capital Markets similarly wrote, "domestic ad growth of -4.0% was in line with our estimate and management expects it to weaken in F4Q16 due to challenges from the Olympics (we estimate -6.0%)." JPMorgan analyst Alexia Quadrani also expects fourth-quarter ad sales to fall 6% year over year, "as we expect sequentially softer advertising trends around the Olympics in the quarter before a likely acceleration in future quarters given better recent ratings at Comedy Central, new programming at MTV in the fall, and ongoing ratings strength at Nickelodeon and VH1."
Cable network AMC Networks (AMCX) will also take a hit, according to Jefferies analyst John Janedis. "We expect that key headwinds include the comp against season 1 of FTWD [Fear the Walking Dead], lackluster ratings trends, and a smaller impact from the Olympics," he wrote. "That being said, our '16 estimates are largely unch[anged]."
Netflix (NFLX) also doesn't have Olympic content, but RBC Capital Markets analysts aren't worried. "We believe NFLX can cycle through [near-term] headwinds (Price increases, Olympics) and benefit from medium-term positive factors (Comcast, Disney, and Original Content)," they wrote. "We continue to see a very robust Int'l growth path and expect $8-$10 in EPS by 2020 driven by 160MM global subs @ $10-$11 ARPU with 25%-30% Op Margins - supporting a potential doubling in share price over 3-years."
The Olympics is an opportunity for tech giant Intel (INTC) , asserts Ian Ing of MKM Partners. "We think expectations are intact for INTC's cloud spending to improve and accelerate based on customer buying signals and cloud investments ahead of major online events (Olympics streaming, China's singles day, black friday [sic], etc.)," he wrote.
Another tech giant, Cisco (CSCO) , hopes to see strength in emerging markets from its role as a supplier to the Olympics. "On the Geos, Cloud rollouts in the US continue to see robust infrastructure upgrade activity," wrote Vijay Bhagavath of Deutsche Bank. "In addition, we note strength in Emerging Markets such as India, Mexico, Brazil (CSCO - a networking supplier to the Rio Olympics) etc, and incremental order improvement in Japan."
Cantor Fitzgerald analyst Bryan Brokmeier believes the spotlight on Brazil will benefit a company working on treatments for the Zika virus, like Cerus (CERS) . "Although there have been new announcements of the low risks of contracting Zika during the Olympics, Zika continues to make headlines and we believe that growing awareness and fear may drive shares of companies that are involved in combating Zika higher," he wrote. "CERS offers the only FDA approved pathogen inactivation technology and was recently included in the FDA guidance document for reducing the risk of transfusion-transmission of Zika...At least 12 babies in the U.S. have been born with microcephaly and other serious brain defects caused by Zika. That compares to more than 4,000 babies born in Brazil. More importantly, peak mosquito season just passed in Brazil so most infected babies haven't yet been born - according to multiple recent articles, 40,000 infected babies are expected to be born in Brazil. In our view, a few special reports during the Olympics on Zika and the babies born with microcephaly may be sufficient to create a national outcry over the need to combat Zika in the U.S, which would further support shares of CERS."
While hotel company Belmond (BEL) took a hit before the Olympics, the aftermath may benefit the stock. "Belmond reported 2Q16 results that were below consensus as travel to Brazil slowed ahead of the Olympics," wrote Barclays analyst Felicia Hendrix. "That said, Belmond maintained its full year RevPAR outlook based on strong forward indicators for 3Q16 in Europe, Brazil and Charleston." Christopher Agnew of MKM Partners attributed the reiterated guidance in part to the benefits from the Olympics: "We believe BEL reiterated FY16 guidance due to increased visibility into Brazil (Olympics) and Western Mediterranean (strong international inbound travel) hotels...[including] the benefit of the Olympic Games on Belmond Copacabana Palace in Rio (expected ~ $4mn benefit as of 1Q)."
Jim Durran of Barclays warned that Canadian Tire's (CTC) sponsorship of the Canadian Olympic team represents one of the company's "extraordinary investment expenses ... that could slow the growth" in the second half of the year. Nonetheless, "we prefer CTC over the more expensive grocers who are facing comparable, or potentially greater headwinds."
The Olympics won't help Whirlpool (WHR) in the near term, according to KeyBanc's Kenneth Zener. "While the Olympics and political unrest in Brazil remain near-term headwinds in Latin America, we are encouraged in the outlook with the potential for flat demand in FY17," he wrote. "WHR is targeting ~8% margins exiting 4Q16 (vs. 10%+ historically), and we believe upside opportunities exist as FX/demand headwinds ease."
Dick's Sporting Goods
Dick's Sporting Goods (DKS) is also an Olympic sponsor, and Deutsche Bank analyst Mike Baker hopes that investment will pay off. "We are forecasting $15 million of investment spend in the second quarter on Olympics partnership marketing, full service footwear decks and e-commerce, all-in," he wrote. "This equates to about 80 basis points of SG&A headwinds or $0.08 to EPS."
Analysts at Canaccord Genuity and Credit Suisse assessed restaurant companies and found concerns about the Olympics. "Looking ahead to August, we expect a slight sequential slowdown given the Rio Summer Olympics (August 3-21), which is airing live in prime-time for the first time since Atlanta in 1996, impacting the first three weeks of the month," Canaccord analysts wrote. "Also, we note that August will be facing a modestly more difficult lap over last year vs. July." Credit Suisse analyst Jason West held a restaurant conference with companies including Panera Bread (PNRA) , Del Frisco's Restaurant Group (DFRG) , Potbelly (PBPB) , Bob Evans Farms (BOBE) and Fogo De Chao (FOGO) . "The key focus for both companies and investors was dissecting the drivers of the recent consumer slowdown," he wrote. While most management teams cited the high cost of restaurant food and uncertainty about elections and violence, "some mgmt. teams also noted that sales have been negatively impacted during high-profile events, such as the political conventions and the Olympics."
Texas Roadhouse (TXRH) is also taking a hit from those industry trends, according to Jeffrey Bernstein of Barclays. "TXRH delivered the 2Q16 print needed to support the peak valuation," he wrote. "But unfortunately, the conference call revealed comps have eased (i.e. June/July) of late, similar to the industry, which we believe will overshadow the EPS neutralizer of further food cost favorability, leading to stock price underperformance tomorrow. The question remains whether the recent easing of industry comps will persist (potentially pressured by Olympics, debates, elections). Importantly, while TXRH comps have eased, they continue to far outpace the industry, driven by traffic."