Can media stocks shine again?
That’s the rub as showbiz CEOs and the befuddled fund managers who buy and sell their shares catapult into conference season — Wall Street’s equivalent of back to school.
After a sluggish summer, there’s a lot to share. At the Merrill Lynch media conference in Pasadena, Calif., last week, investors learned Disney’s got film woes, Leslie Moonves has had it up to here with the CBS “Evening News,” and every last media exec has fallen madly in love with the ‘Net.
Moguls are readying a reprise at Goldman Sachs’ annual media confab in New York Sept. 21.
Moonves and Viacom co-COO/co-prexy Tom Freston talked up their dueling domains. Presentations are dress rehearsal for when the two execs will hit the road to tout their two separate companies to investors as the media conglom prepares to split in half. Same with Randall Mays, chief financial officer of radio giant Clear Channel, which is splitting into three pieces.
Splits and spinoffs will reconfigure the media landscape over the next six months. Execs are praying the stocks will go up as investors value parts more than whole. In the case of Viacom and Clear Channel, they’re yanking fast-growing entertainment assets away from, well, radio.
Viacom chairman-CEO Sumner Redstone has declared bigger isn’t better: The age of the conglomerate is over.
But conglomerates aren’t good or bad — the economy can be good or bad; the stock market can be good or bad; the ad market can be good or bad.
When they’re bad, as they have been, stocks slump. Then they need a change, even for the sake of change. A catalyst in Wall Street lingo.
“People are interested in action. They’ve gone to energy, technology, pharmaceuticals,” says one fund manager.
“Wall Street isn’t efficient all the time, or logical all the time,” says another.
Splits are catalysts. So is Time Warner’s talking about selling a chunk of AOL to Microsoft, with Carl Icahn’s shadow in the background. Or Disney looking to re-up with Pixar. Or Rupert Murdoch spending $1.5 billion in two months on Internet assets.
Most Wall Streeters are impressed Viacom had the guts to unwind a six-year-old, $40 billion deal. But they’re only predicting a modest uptick in the stock price, given the outside economic factors. MTV-Paramount, the “growth co” will certainly grow faster. MTV already does and Par has lots of untapped potential.
If the ad market picks up, the CBS-Infinity chunk might zoom to the front of the class.
But how, and how fast the market, the economy or ads pick up is anyone’s guess.
Larry Haverty, associate portfolio manager at Gabelli & Co., sees advertising bumping up in 2006 with a resurgence in ’08 on the Olympics in Beijing and the first presidential election in 52 years where there won’t be an incumbent president or vice president running.
“The field is wide open,” he says.
He thinks just about every stock in the media sector is undervalued.
“Cable is selling at the lowest value it’s been at in 10 to 15 years. There are competitive pressures, but I pay my cable bill every month, and so do 90 million other people.”
And, if two years are too long to wait for the Time Warners, News Corps. and Disneys of the media world, there are alternatives.
How about Intl. Speedway (NASCAR tracks), New Frontier (porno), or National Lampoon? Or even AVN Pro Beach Volleyball? It’s only 15¢ a share.