TWX: We Expect a Deal - Upgrading to Buy -- Pivotal Research
Following news last week that the Department of Justice would seek to block the AT&T acquisition of Time Warner, Time Warner stock fell from already low levels and has maintained a depressed valuation, reflecting a lack of confidence in the likelihood that a deal occurs. However, we expect that some kind of transaction will eventually occur, whether through AT&T litigating with the DOJ, divesting assets or through a sale to another media company in the event no deal with AT&T went through. As our underlying value of Time Warner on a stand-alone basis is around $81 on a YE2017 basis, at current levels the downside seems limited, and the upside to what we calculate as a $103 current value using recent trading levels of AT&T is significant considering our view that the transaction will ultimately occur. With more than 15% upside to current trading levels, we are upgrading the stock from Hold to Buy at this time.
VALUATION. We value TWX based on the valuation embedded in AT&T's proposed acquisition.
RISKS to Time Warner include those around the closing of the sale to AT&T. At an operating level, risks include the hit-driven nature of television programming, perceptions around the "death" of TV advertising and risks around slow-downs in the pay TV business.
FULL REPORT INCLUDING RISKS AND DISCLOSURES CAN BE FOUND HERE: TWX 11-13-17.pdf
The opinions and points of view expressed in this content are exclusively the views of the author and/or subject(s) and do not necessarily represent the views of MediaVillage.com/MyersBizNet, Inc. management or associated writers.
Brian Wieser
Brian Wieser is Global President, Business Intelligence for GroupM, WPP’s media investment Group. He is leading GroupM’s thought leadership practice to ensure that WPP’s clients receive actionable marketplace intelligence on markets, audien…
