Yesterday, in the post immediately below, I mentioned that Disney (DIS), News Corp (NWS, NWS.a), and Time Warner (TWX) were all trading at 52 week highs. Departing from the doom and gloom that Dominates most discussion of media stocks, I laid out some big picture thoughts that might be driving the bullish action in the stocks. However, there are actually some short-term developments that are helping each company. In particular, DIS continues to enjoy a string of good news that has driven the stock for the past couple of years…..
https://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gif00Steve Birenberghttps://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gifSteve Birenberg2006-09-29 16:54:022006-09-29 16:54:02Near-Term Good News For Disney
The New York Times and Goldman Sachs were both out recently with analysis of the radio industr. Commentary in both reports was generally negative, noting the lack of advertising growth and the loss of usage share to other media such as the Internet radio and iPods.
The Goldman Sachs report had some very interesting data. First, as noted elsewhere, Goldman points out that recent studies show that time spent listening to radio is falling at a 2% annual rate. This is an acceleration in the rate of loss from a decades long decline at a 0.20% rate. Interestingly, Goldman says that time spent listening in cars is up (primarily due to longer commutes), with all the loss coming from listening at home and at work. Both these areas are more accessible for iPods and Internet radio. Even worse for the radio industry, the bulk of the share loss is in the 12-17 and 18-34 demographics. Other trends noted by Goldman include news and talk gaining share at the expense of music stations and women more rapidly abandoning the medium than men.
Overall, this presents a bleak picture and clearly explains the significant declines in almost all radio stocks this year…..
https://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gif00Steve Birenberghttps://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gifSteve Birenberg2006-09-28 13:13:392006-09-28 13:13:39Nothing But Static in Radio Stocks
Wow! Time Warner (TWX), Disney (DIS), and News Corporation (NWS, NWS.A) all made 52 week highs yesterday.
On the one hand I shouldn’t be surprised because the Dow and S&P 500 are at multiyear highs. On the other hand, media stocks as a group have been pretty poor over the last few years with key sub sectors like radio and newspaper suffering severely eroding fundamentals. Granted, DIS, TWX, and NWS are underrepresented in these areas but they are still exposed to the internet challenge, general advertising trends, competitive pricing in TV distribution, and weakening trends in theatrical films and DVD sales.
I suppose the new highs in these stocks could just be a gift from trading gods since yesterday was my 46th birthday. However, something broader seems at work. If I had to guess I’d point to two factors that might account for the simultaneous strength. First, the big entertainment conglomerates are growth cyclicals in terms of their earnings and cash flow. This makes them beneficiaries of soft landing scenario that is being credited with the market’s current bullish phase. Advertising represents about 20% of revenue for DIS and TWX and 40% of revenue for NWS. DIS gets and other 30% of revenue from its theme parks. Improved investor confidence in future economic growth should be reflected in higher valuations for these economically sensitive revenues. Additionally, word out of Goldman Sachs Commuicopia conference last week was that current broadcast and cable network TV advertising trends were firming. DIS, NWS, and TWX have the bulk of their advertising exposure in these national categories.
Second….
https://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gif00Steve Birenberghttps://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gifSteve Birenberg2006-09-28 13:10:312006-09-28 13:10:31Big Media Stocks Performing Surprisingly Well
Investors have responded favorably to the nice price that Time Warner (TWX) received for its AOL access business in Germany. Citigroup is projecting total proceeds of $2 billion once all of the European access business is sold in the next few months. I consider that a good price, better than I expected, and enough to continue recent momentum in TWX shares.
One negative to watch for is falling estimates and potential write-offs following a horrible summer for Warner Brothers feature films. This will cut into 2006 and estimates. For now, though the trend for TWX seems upward as several analysts upgraded the shares and are looking out to 2007 and 2008.
https://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gif00Steve Birenberghttps://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gifSteve Birenberg2006-09-27 09:30:222006-09-27 09:30:22Time Warner Gets Good Price For AOL Germany
ThinkSecret.com is reporting that Apple Computer (AAPL) will be launching a cell phone through Cingular early in 2007. The report says that Cingular will have a six month exclusive. This report is just a rumor and based on my own perusal of the ThinkSecret website I wouldn’t put a lot of stock in it.
However, if it is true it raises a couple of interesting points. First, most analysts had assumed that AAPL would launch be a mobile virtual network operator (MVNO), leasing spectrum from someone like Sprint and then reselling it. Current MVNO’s in the US have not been very successful. If AAPL avoids MVNO, is that a positive for wireless operators? Second, the phone is supposedly to be tightly tied to iTunes. If so, that means users will expect iTunes pricing, meaning 99 cent over the ari downloads. After all, the phone will surely have a USB connection so you can hook up to your computer just like an iPod. Presently, mobile operators charge $1.99 or more for downloaded songs and ringtones. It seems like an Apple iPhone could collapse this pricing structure. Ringtones are already a big business so this could have negative ramifications for mobile operators. Then again, if Apple can upgrade the music phone experience (so far music phones have not received good reviews in the US), the market could grow much more rapidly offsetting any pricing compression and igniting another round of phone replacements….
Yesterday, Tribune (TRB) gave up about 25% of its gains since announcing a settlement with the Chandler Family and creation of a committee of independent directors to look at shareholder enhancement opportunities. Supposedly everything is on the table, including the spilt up or outright sale of the company.
Investors expecting a big payday due to published estimates that the company might be worth $40 or more have to be disappointed so far. I think that my StreetInsight.com colleague Chris Atayan basically has it right when he says that the company already looked at all the alternatives the independent directors will consider and decided to complete a dutch auction and buy back additional shares from the McCormick Foundation. Chris is likely correct in his analysis that management and the Board already know that the dutch auction created as much value as any other alternative. In other words, management knows what I and some others have been saying for awhile: TRB shares are not significantly undervalued when they are trading in the low $30s.
In fact, if you put public market multiples on the separate TV and newspaper parts, at best, you get to a mid $30s target….
https://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gif00Steve Birenberghttps://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gifSteve Birenberg2006-09-26 11:31:002006-09-26 11:31:00Despite Possible Sale Upside in Tribune is Limited
Apple Computer (AAPL) shares have continued to rise following the introduction of Microsoft’s Zune music player. Apple has benefitted from growing recognition of the company’s outstanind momentum in Mac sales, excitement over the previewed iTV device, and the introduction of updated iPods for the holiday selling season. Additionally, the Zune has been met with a yawn from previously worried observers. I think the momentum will hold and AAPL shares can make a new all-time high in the nex several months.
Given the recent focus, here are are some thoughts on the Zune player written from the perspective of the impact on Apple shares over the next three to six months. Obviously, Zunes and iPods will both develop their capabilities and ecosystems, so I am keeping my mind open on a long-term basis.
I see three differentiating factors for Zune vs. iPod. First, the wireless capability. Second, the subscription model. Third, the larger screen. For this holiday season, I see minimal value in wireless, potential value in the subscription model and real value in the larger screen….
https://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gif00Steve Birenberghttps://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gifSteve Birenberg2006-09-26 11:22:042006-09-26 11:22:04Zune Not A Near-Term Threat To iPods
Yahoo! (YHOO) guides down and its shares trade off 12%. On the same day, Viacom (VIA, VIA.b), Time Warner (TWX), Disney (DIS) and CBS (CBS) all trade higher. Yahoo! says that advertising in economically sensitive industries including automotive and finance showed a sudden weakening. These two advertising categories are important for traditional media companies. At the same conference where Yahoo! guided lower, most traditional media companies said that there have been no recent changes in the ad environment. If anything, scatter markets for cable and broadcast TV have strengthened a little. What is going on here?….
https://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gif00Steve Birenberghttps://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gifSteve Birenberg2006-09-25 12:07:132006-09-25 12:07:13What’s Going On With Yahoo!?
Last week on Real Money, there was a debate on the growth vs. value question. It began when my colleague, Ed Stavetski asked, “As the economy slows and earnings growth tails off, does one want to own value or growth?” Ed asked the question after reviewing year-to-date returns for the Russell growth and value indices that show a big edge for value (this edge was captured by Northlake’s Style model which flashed a value signal from February through August). His conclusion appeared to be that the market had spoken and a slowing economy was rewarding value.
Another colleague, Gary Dvorchak, jumped into the debate the next day looking at valuation of growth vs. value. He showed some charts indicating that growth is close to an all-time low on a relative value basis vs. value. Obviously, his conclusion was that growth is now the place to be. Northlake’s model, courtesy of Ned Davis Research, offers a similar split decision but did shift to a weak growth signal this month. The shift follows a summer that started with just three of the nine factors favoring growth. Entering fall, there are now five on nine factors favoring growth. That is barely enough to shift the signal, but it shifted nonetheless…..
https://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gif00Steve Birenberghttps://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gifSteve Birenberg2006-09-25 12:02:442006-09-25 12:02:44Debating Growth and Value
Following a strong second-quarter earnings report and guidance that was deemed by many observers, including myself, as conservative, Dow Jones (DJ) shares rallied from $33 to $37. The rally stalled and reversed around Labor Day. Last Tuesday we learned why. DJ lowered its third-quarter earnings guidance to 8 cents-11 cents from a previous target in the “low teens.” Analysts had continued to think prior guidance was conservative as evidenced by a 3Q06 consensus estimate of 14 cents.
The prior guidance was based upon mid-to-upper single-digit advertising gains at the Wall Street Journal. In its monthly revenue report yesterday, which contained the change in guidance, DJ revealed that the Journal will fall short of a mid-to-upper single-digit gain. So far this quarter, July saw a 5.8% gain and August had a 6.9% gain. September, however, is now forecast to be negative. Taken together, it looks like the quarter will witness a mid-single-digit gain at best…..
https://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gif00Steve Birenberghttps://dev.northlakecapital.com/wp-content/uploads/2026/02/nl_logo.gifSteve Birenberg2006-09-25 11:44:192006-09-25 11:44:19Dow Jones Lowers Third Quarter Guidance
