We reiterate our Neutral recommendation on Liberty Media Corp. (LINTA - Analyst Report). The company’s second quarter of 2011 financial results outperformed the Zacks Consensus Estimates.
Liberty Media’s most prestigious division QVC continues to perform well. QVC shopping network has transformed itself as a powerful global brand, which may help the company to grow its revenue in double digits in the near future.
QVC division of Liberty Media has become the undispted market leader in the $8 billion TV home-shopping business. At present, QVC commands an estimated 69% market share, far ahead of its nearest rivals, HSN Inc. (HSNI - Snapshot Report) and ValueVision Media Inc. (VVTV - Snapshot Report)
Furthermore, Liberty Media also owns 32% stake of HSN Inc. TV home-shopping business is characterized as one with very stable customer base, who are mostly women. QVC accounts for 11 million customers in the U.S., which is expected to grow in the long term.
Liberty Media has abandoned its plan to buy a controlling stake in Barnes & Noble Inc. (BKS - Snapshot Report) Instead, the company will invest $204 million to purchase preferred stock of Barnes & Noble, which can be converted into approximately 12 million shares of the latter. These preferred stocks will pay an annual dividend of 7.75%.
Barnes & Noble is the largest bookseller of the world. The company currently operates 705 general bookstores and 636 college bookstores throughout the U.S.
Most importantly, Barnes & Noble has an extensive digital business, whch grew by a substantial 64% in the previous quarter. This is in major contrast with the declining print book sell of the company.
In 2009, Barnes & Noble created a powerful e-book reader called the Nook to revamp itself as a digital bookseller. Nook commands about 25% of the global e-book market and at present is the second largest e-book reader after the “Kindle” of Amazon.com. We believe the new deal will benefit Liberty Media in several ways particularly under an extremely volatile macro-economic situation.