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Analyst Blog

We reiterate our long-term Neutral recommendation on Liberty Media Corp. (LMCA - Analyst Report). The company is gradually restructuring its business model, targeting to control the subscription-based companies.

Why Kept at Neutral?

During the last six months, Liberty Media has been restructuring its business model. In Jan 2013, the company spun off its Starz Entertainment segment as a separate entity. Starz is famous for its premium movie channels. Management stated that this will unlock the latter’s value by optimizing its capital structure and enabling Starz to find several alternative ways and partnerships for both content creation and distribution.

Starz is famous for its premium movie channels. At the end of 2012, total subscribers base of Starz increased 9% to 21.2 million while its sister TV channel, Encore, had 34.8 million subscribers, up 5% year over year.  

In the same month, Liberty Media acquired more than 50% controlling stake of  SIRIUS XM Radio Inc. (SIRI - Analyst Report), the largest satellite radio broadcaster of the U.S. The company also raised its stake to 27% in Live Nation Entertainment Inc. (LYV - Snapshot Report), the largest concert promoter and ticketing company in the U.S.

Recently, Liberty Media has entered into an agreement with several private equity firms to acquire a 27.3% stake of Charter Communications Inc. (CHTR - Analyst Report) for a consideration of $2.617 billion. Charter Communications is currently the eighth largest pay-TV operator in the U.S. with around 5.2 million video subscribers.

After this acquisition, Liberty Media will get a solid foothold in the U.S. pay-TV market. Liberty Media currently has a Zacks Rank #2 (Buy).

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