In 2019, as legacy media companies finally came to the realization (albeit, more forced than realized) that they had to pivot away from the dying multichannel video bundle, we highlighted the risk that Amazon, Apple and Roku could be the real winners, as legacy media did not appear to have the “guts” to really go all-in on direct-to-consumer streaming. HBO was the prime example of taking the easy road while sacrificing long-term value creation, as we highlighted in July 2019: … Continue reading HBO Max Makes Critical Decision – Does it Spell Doom for Channel Stores?
There has been a surprising focus/obsession among investors and the industry press over the relative subscriber base size/growth of SVOD platforms and not enough focus on relative SVOD revenues and revenue growth. We highlighted this issue in our Six Issues Disney Did Not Address Last Night That Need to be Answered (link), which centered on what Disney+’s ARPU is outside the US, particularly in India (where it is embedded in Hotstar at a fraction of the US ARPU). Trying to … Continue reading Netflix’s US Biz Growing Revenues Faster than Hulu: 3 Key Implications
We are downgrading Cogent to Neutral from Buy on disappointing revenue growth in Q1 and new questions about the company’s ability to sustain dividend growth. The massive slowdown in the normally predictable Corporate customer base was particularly troubling. Dating back to 2018, we expected Q2 2019 to be the trough quarter for Cogent’s revenue growth with acceleration thereafter. That thesis is broken. Cogent sequential revenue growth slowed dramatically in Q1 to 0.4% from 2.4% last quarter. This resulted in a … Continue reading Downgrade Cogent to Neutral On Growth Slowdown And Questions On Dividend
We walked away from Disney’s fiscal Q2 (March) earnings conference call even more convinced that investor expectations for fiscal 2021 and 2022 are far too high (see yesterday’s downgrade to SELL, link). But what really upset us was that there were several important issues that were never addressed by the company or even asked about by analysts during the Q2 earnings call. These are our top six: 1) Parks Being Allowed to Re-Open is Different Than Should Parks Re-Open In … Continue reading The Six Issues Disney Did Not Address Last Night That Need to be Answered
Our April 15th report on Disney titled Disney’s Unique Vulnerability to COVID-19 Should Keep Investors Away centered on how we thought about fiscal (September) 2021 earnings relative to fiscal 2019, acknowledging that 2020 would likely be ignored by investors. Yet, the more we have learned in the past few weeks and thought about how we modeled 2021, we believe our estimates were still far too aggressive (and we were below everyone else). In turn, we are significantly cutting our 2021-2022 … Continue reading Downgrading Disney to SELL $85 Target; Leverage Could Hit 5x as Earnings Plummet
As parts of the world begin to emerge from quarantine, we have eight critical questions for legacy media executives to answer as they begin to report Q1 2020 earnings this week: 1) Is Talent Comfortable With Restarting Production? Both Warner Bros. (link) and Netflix (link) have talked about the challenges and complexities of restarting production. Daily (if not even more regular) testing, quarantining (before production and the inability to leave the location during shoot), and adjusting scenes (tied to where … Continue reading Eight Reopening Post COVID-19 Questions Legacy Media Executives Must Answer
The global video games industry has benefited from technology driven secular tailwinds for several years. More players touch games every year, players are playing for longer, and publishers are able to directly monetize time spent, with all of this at a higher margin. The trend has been well established. At the same time, the games industry has exerted broader cultural influence, as games like Fortnite became part of the zeitgeist, or technologies developed for games have become more commonplace. Consumer … Continue reading Eight Key Video Game Takeaways from the Quarantine
Comcast wireless net adds were up 27% and EBITDA loss dropped to a record low to start 2020 as xFinity Mobile gains traction, moving closer towards our breakeven target. What could be next with CBRS and Dish? Path to Breakeven in Q1 of 2021? Comcast’s EBITDA loss, while a new low, was in-line with our expectations. We did not see a notable impact on results of lower Verizon network usage from shelter-in-place conditions that were implemented at the tail end … Continue reading xFinity Mobile Gains Traction As Sub Growth Surges. Can CBRS and Dish Play a Role?
We are initiating coverage of Apple with a Neutral rating. We do not expect 5G to trigger a supercycle and believe the consensus revenue and EPS estimates for 2021 are too optimistic about the impact of 5G on iPhone sales. We expect this to ultimately lead to downward revisions. We are also concerned that the Services business will not live up to growth expectations, which will challenge investors ability to continue to re-rate Apple’s stock higher on the view that … Continue reading Initiating Coverage Of Apple With Neutral Rating. Questioning 5G And The Services Narrative.
UPDATE: We believe multiple MVPDs informed ESPN that affiliate fees should not be paid starting in April 2020 because sports content is not being delivered as specified in their affiliation agreements. The MVPDs correspondence with Disney/ESPN have apparently been completely rebuffed, even though the MVPDs indicated that all fees not paid to ESPN would be rebated directly to subscribers; helping US consumers who are hurting financially. While the next steps are unclear, it’s evident that Disney/ESPN expect to collect their … Continue reading Enough is Enough, Distributors Want to Rebate Subs for Sports That Did Not Happen