Nielsen: Upgrading From Hold to Buy -- Pivotal Research

There are many negative factors understandably weighing on Nielsen stock However we think they are likely overdone as the longterm durability of the business remains in placeFor example we think investors look at trends around national TV measurement through a negative lens Open AP and other initiatives focused on expanding the use of nonagegenderbased metrics are commonly viewed as negative for Nielsen as there is a view that advertisers will reduce their reliance on agegenderbased metrics We think this is not likely to occur broadly any time soon We do see advertiser interest in complementing their agegenderbased targeting but mostly as a means of prioritizing inventory that will be negotiated for and guaranteed on agegenderbased metrics In other words networks who want to sell to these advertisers will continue to rely on Nielsenamp8217s data as will agencies who service those marketers If anything there is potential for upside from the use of additional Nielsen services such as NBI or NCS in establishing complementary targets These revenues will be incremental to existing revenues Cordcutting and cordshaving are viewed as a threat as is the pruning of network portfolios Cord cutting and cord shaving is probably beneficial to the extent that incumbent network fees wonamp8217t change much but upstart SVOD services and vMVPDs are becoming new customers Further for every minor network that drops Nielsen it appears another one looks to capture national TV ad budgets through Nielsen measurement The ongoing growth of digital media is also providing to be beneficial for Nielsen because advertisers generally pay Nielsen on a campaign basis More campaigns on digital media mean more revenue for NielsenThe Buy side of the business is certainly facing more pressure as the companyamp8217s core customer base has been looking for ways to reduce spending However we know that growth is still possible here based on data from the AMAamp8217s newly released survey of US market research growth during 2017 While results were negative for one of the companyamp8217s primary Buy competitors WPPamp8217s Kantar we saw significant growth from Nielsenamp8217s other key competitor IRI which expanded its business by 15 This followed on growth in 2016 of 4 Given a relatively similar customer base we think that market share has been a factor for Nielsen As it evolves its Connected System and other initiatives and as customers undergoing zerobased budgeting exercises cycle through those efforts we continue to expect that over time Nielsen can position this business to return to growthAs for the catalysts that could cause an improvement in sentiment we expect that as this yearamp8217s national TV upfront progresses investors will come to see that the bulk of guarantees were once again established around Nielsen ratings Further as time progresses we expect that eventually more measurement of nontraditional adsupported TV services will see lightofday these services are already measured but data is not provided publicly by Nielsen demonstrating the companyamp8217s relevance into the future Buy businesses will probably require an actual resumption of growth amp8211 which should happen later in the year amp8211 for investors to alter their sentiment around that part of the companyOverall we think that investor sentiment is overly negative at this point in time and expect that it will rebound We maintain our 35 YE2018 price target while upgrading our recommendation from Hold to BuyVALUATION We value Nielsen with a DCF using an 88 nearterm discount rate an 117 longterm discount rate and longterm 35 growthRISKS include macroeconomic trends the rising availability of lessexpensive research solutions which could impact Nielsenamp8217s discretionary services and the potential that Nielsenamp8217s status as the provider of a TV advertising trading currency could be threatenedamp160FULL REPORT INCLUDING RISKS AND DISCLOSURES CAN BE FOUND HERE NLSN 6418pdfThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers

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Nielsen: Upgrading From Hold to Buy -- Pivotal Research

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Brian Wieser

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Nielsen: Upgrading From Hold to Buy -- Pivotal Research

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