Disclosures

The analyst primarily responsible for the preparation of this research report attests to the following: (1) that the views and opinions rendered in this research report reflect her personal views about the subject companies or issuers; and (2) that no part of the research analyst’s compensation was, is, or will be directly related to the specific recommendations or views in this research report. 

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LightShed Partners (the “Company”) is an independent equity research provider. The Company is not a member of the FINRA or the SIPC and is not a registered broker dealer or investment adviser. Lightshed Partners has no other regulated or unregulated business activities which conflict with its provision of independent research. 

Ratings Definitions 

Current Ratings Definition 

LightShed Partners’ recommendations are based on a stock’s total forecasted return over the next 12 months. Total forecasted return is equal to the expected percentage price return plus gross dividend yield. We divide our stocks under coverage into three primary ratings categories, with the following return guidelines: 

Buy – we expect the stock price to appreciate by 15% or more over the next 12 months


Neutral – we expect the stock price to change by less than 15% within the next 12 months


Sell – our firm’s opinion is that this stock likely will be down by 15% or more over the next 12 months 

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Company Valuation and Risk Disclosures

Activision Blizzard, Inc. (ATVI, Buy, $68.00 PT)
Valuation: Our 12-month price target of $68 is based on a 22x average of modeled 2020-2021 earnings.
Risks: We expect significant Blizzard releases to be announced at BlizzCon 2019. An absence of material announcements could have an impact on stock sentiment and earnings estimates. CoD Mobile fails to maintain its current monetization trajectory over an extended period of time. Poor execution of in-game monetization could alienate consumers. Inability to develop advertising business for King.

Netflix, Inc. (NFLX, Buy, $375.00 PT)
Valuation: Our 12-month price target of $375 is based on a 25x 2021 EV/EBITDA multiple.
Risks: Proliferation of new SVOD and AVOD streaming services (Disney+, Apple TV+, HBO Max, Quibi, Peacock, etc) increases competition for consumer time and money, which could have a negative impact on Netflix’s subscriber growth, particularly in the US . More competition for content could increase Netflix’s content costs and slow its contribution margin growth. Competitors have started to pull library content from Netflix, which could increase the service’s churn. Netflix has historically accessed debt markets for financing. Any adverse changes in lending standards could impact Netflix’s ability to continue increasing their spend. International growth will require specific, and potentially expensive, content tied to each individual market, with no guarantees that the content will resonate outside of its intended market.

Snap, Inc. (SNAP, Buy, $20.00 PT)
Valuation: Our 12-month price target of $20 is based on a 25x 2022 EV/EBITDA multiple discounted back one year at 20%
Risks: Facebook increasing its focus on private messaging through Threads could pressure Snapchat’s user base. Outcome of ongoing SEC/DOJ Investigation is unknown. Snapchat’s entrance into mobile gaming could be met with increased ongoing competition through both subscription offerings (Apple Arcade, Google Play Pass) and free-to-play (evidenced by the recently released Call of Duty: Mobile). Increased competition in the mobile advertising space.

The Madison Square Garden Company (MSG, Buy, $60.00 PT)
Valuation: We value MSG at $360, based on a sum-of-the-parts basis. We are valuing Entertainment Co at $161 excluding its retained interest in sports.  We are valuing Sports Co at $198.  If we allocate 1/3 of Sports to Entertainment, Entertainment shareholders would own $227 per share of value in the Entertainment company and $133 in Sports company.  Adding the two pieces together, we get $360.
Risks: Greater-than-anticipated capex and lower-than-anticipated EBITDA tied to the MSG Spheres. Economic downturn in New York City. Declining or stagnant professional sports franchise valuations in future ownership sales.