Nathanson still concerned about cord cutting
Analyst Michael Nathanson of MoffettNathanson Research has raised his earnings estimates for several media companies based on comments from executives that second-quarter advertising revenues are coming in better than expected.
Nathanson remains concerned that cord-cutting will have an impact on media companies in the second half of the year.
Nathanson raised his calendar second quarter ad revenue estimates for those three companies by 4% to a 27% plunge, and his calendar 2020 advertising revenue estimate by 2% to a 14% drop.
He also raised his second quarter EBITDA estimate for Fox by 8% and raised ViacomCBS by 3%, while leaving Discovery unchanged. For the full year, he sees Fox doing 2% better and Discovery and ViacomCBS each improving by 1%.
“While these data points and revisions are welcome news to a sector that has been pummeled by the market, there are two bigger overhangs that are not likely to be cleared any time soon,” Nathanson said in his report Thursday.
“The first is the number of U.S. Pay TV subscribers, which we currently forecast due to the absence of live sports and economic weakness will decline by a further 160 basis points from 1Q to 7% in 2Q 2020,” he said. The second is the sequential pace of the TV advertising recovery, which will undoubtedly improve from 2Q 2020 to 3Q 2020 as political spending strengthens and key sports return, but at what rate?”