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Meredith Corp. Held at Neutral

MDP MSO

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We maintain our Neutral recommendation on Meredith Corporation (MDP - Analyst Report) with a target price of $35.00, as the company’s dependency on traditional advertising remains an inherent risk to its growth. 

However, it is encouraging to observe that Meredith has been working diligently to explore and add alternative revenue generating opportunities in order to reduce its dependency on traditional advertising by entering into strategic alliances. These include expansion of its integrated marketing offers, video related operations, brand licensing, and mobile initiatives.

Moreover, the company has been taking initiatives to enhance its online presence through the acquisition of online marketing firms – Genex, New Media Strategies, and Healia, and a mobile marketing firm – The Hyperfactory. Meredith also launched Meredith Women's Network, largely covering women-related topics.

Meredith remains committed to making strategic investments to increase its revenue generating capabilities and in turn enhance its profitability. The company is aggressively expanding its brands through online platforms, televisions, videos and is expanding its reach of food and lifestyle content across tablet products, such as the iPad, NOOK Color, Kindle Fire and Samsung Galaxy.

However, more than half of the company’s revenue is derived from advertising, which in turn depends upon the health of the economy. The company’s National Media Group and Local Media Group’s revenue remain prone to changes in advertising demand.  

Further, the company has been facing stiff competition across its magazine, books and related publishing products as well as at its television and radio stations with other mass media, including the Internet and other broadcasting stations. The competition mostly affects advertising rates, circulation levels and reader demographics and is expected to weigh upon the company’s top and bottom line results.

Currently, Meredith, which competes with Martha Stewart Living Omnimedia Inc. (MSO - Snapshot Report), holds a Zacks #3 Rank that translates into a short-term ‘Hold’ rating.

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