Page 33 - DIY Investor Magazine | Issue 39
P. 33

The media sector continues to frustrate; underlying GDP growth and consumer confidence remain suppressed, with timescales for a rebound pushed out, so there is hesitancy at the corporate level to release budgets for sales and marketing, and investment in digital transformation.
However, subscription services have held up better than expected. In the UK, low corporate valuations and a weak currency may be triggering a long-awaited upsurge in corporate activity.
There have been small moves in corporate revenue and EBITDA forecasts reflected in rises in media share prices in Europe (2%)and North America (3%) and falls in the UK (- 3%). Valuations are still a long way below their long-term averages MediaWatch tracks the performance and changes to consensus forecasts for media companies in the UK, European and US markets. We highlight the direction of travel for revenue and EBITDA (as a proxy for earnings) and estimate changes across the seven constituent subsectors for 2023/4.
At stock level we compare current valuations with their long- term averages, where a large majority of stocks continue to trade at a substantial discount; either pricing remains too low, market earnings estimates are still too high, or both. In this edition, we include the absolute numbers of upgrades and downgrades in each subsector, information sometimes swamped by movements in the dominating stocks.
United Kingdom: UK media was the only region to underperform its local market as half of the six subsectors delivered below-market returns; this was accompanied by downgrades to CY23e sales and EBITDA estimates.
We highlight 28 companies forecast by consensus to deliver positive free cash flow in CY23e and CY24e that were trading at a discount to their long-term average EV/EBITDA multiple.
Continental Europe: European media sector’s positive return of 2% was impressive, driven by strong returns from the two largest subsectors, movies and entertainment and interactive media & services.
CY23 sales estimates were unchanged, but aggregate EBITDA
estimates were downgraded 2% in the quarter.
We highlight 79 companies trading with a CY23e EV/EBITDA multiple below their long-term average multiple are forecast by consensus to generate positive free cash flow in CY23 and CY24 at end-Q323.
North America: This sector outperformed its local market by the largest margin of the three, driven by a strong performance of the interactive media & services subsector, as Alphabet’s and Meta Platform’s share prices continued their rally in CY23.
There was little change to consensus estimates for CY23 sales; the market was more bullish regarding profit estimates as the sector enjoyed a 4% upgrade to CY23 EBITDA forecasts.
We highlight 85 companies forecast by consensus to deliver positive free cash flow in CY23 and CY24 and that were trading at a discount to their long-term average EV/EBITDA multiple.
Read the full report here >
   Nov 2023
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