Stocks of several big media conglomerates recovered slightly in Friday morning trading, after the sector sloughed off more than $60 billion in market value over two days — a selloff panic spurred by new signs the pay-TV biz is in systemic decline.
Viacom led peers in the group, recouping some losses with the stock up as high as 6% in the early session. But its shares had plummeted more than 13% Thursday, after the media company reported lower revenue and profits on a 9% drop in ad sales in its MTV Networks group because of declining ratings.
Time Warner and 21st Century Fox also were trending up Friday, with shares increasing 2.3% and 2%, respectively, in early trading. Scripps Networks Interactive and AMC Networks likewise inched up in early trading.
Disney opened slightly higher, before declining about 0.5% in mid-morning. CBS, which closed up 3.6% Thursday after posting earnings that beat Wall Street expectations, was down more than 2% in the Friday a.m. session. Discovery Communications was down about 2% (after closing up 3.5% Thursday).
The tumultuous week for media companies — which some observers saw as an overreaction by jittery investors — was triggered by Disney’s lowered forecast for expected increases in cable affiliate fees for networks including sports juggernaut ESPN.
Indeed, with the selloff in Time Warner shares, analyst firm MoffettNathanson on Friday upgraded the stock from “neutral” to “buy,” with a $96-per-share target (20% above Thursday close). If the pay-TV bundle disintegrates, Time Warner is well positioned, analyst Michael Nathanson wrote in explaining the upgrade: Time Warner’s HBO “is one of the few brands — along with ESPN — that can operate in an a la carte world… HBO Now is showing signs of early momentum and provides long-term upside with international expansion.”
Meanwhile, U.S. cable, satellite and telco TV providers collectively lost more than 350,000 video subscribers in the second quarter, compared with 151,000 in the year-ago period.
While Q2 is seasonally the weakest quarter for the pay-TV sector, the higher losses indicated that cord-cutting is not only a real phenomenon but that it appears to be accelerating. That trajectory has concerned investors, even given that the numbers remain comparatively small given the universe of approximately 100 million U.S. pay-TV households.