Time Warner Inc. (TWX - Analyst Report) is riding high on initiatives such as foraying into new markets, expanding its digital presence and extension of The National Collegiate Athletic Association ("NCAA") deal. However, these signs of optimism are clouded by intense competition and dismal performance of the Warner Bros Division. Keep on reading to find out what are the pros and cons of Time Warner at the moment.
Time Warner has been expanding its digital presence to give consumers a more enjoyable viewing experience by making more contents available in various platforms and devices. Further, Time Warner enhanced the reach of HBO GO streaming service to mobile devices. It also launched an independent online streaming service HBO NOW to target consumers who have access to the Internet but are not cable subscribers.
Time Warner’s significant international footprint has helped broaden its client base and product portfolio. Turner is now concentrating on the enhancement of its reach in existing territories through investments in local production and gaining distribution rights for new networks. The increasing demand of its content from distributors such as AT&T, Verizon, Netflix, Amazon, Hulu and other cable or satellite providers is assisting in augmenting revenue for Time Warner.
Time Warner’s Turner Broadcasting and CBS Corp. have extended their rights to air The NCAA Men's Division I Basketball Tournament through 2032. The deal is valued at $8.8 billion. Given the massive popularity of the event, CBS Corp. and Time Warner investors are likely to enjoy solid returns. With more viewership and higher advertising revenues, both the companies are poised for top-line growth. In the past, both enjoyed high television ratings and advertising revenues from the event.
Hurdles to Cross
Decline in Warner Bros’ revenue is a major concern. Warner Bros’ revenue plummeted 19% to $2,658 million during the second quarter of 2016 on account of fall in videogames, home entertainment and television licensing revenues. Videogame revenues fell as the year-ago quarter included the releases of Batman: Arkham Knight and Mortal Kombat X. Management anticipates tough comparisons in video games and TV licensing at Warner Bros. during the third quarter.
The company faces intense competition across its different segments. To compete effectively in the Networks and Filmed Entertainment segments, Time Warner has to provide high-quality, popular entertainment products, adapt to new technologies and distribution platforms along with achieving widespread distribution.
Time Warner currently has a Zacks Rank #3 (Hold).
Other Stocks to Consider
Better-ranked worth considering include CBS Corporation (CBS - Analyst Report) , Media General, Inc. (MEG - Snapshot Report) and Netflix, Inc. (NFLX - Analyst Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
CBS has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 6.6% currently. It has a long-term earnings growth rate of 14%.
Media General’s shares have gained more than 29% in the past one year.
Netflix share price has witnessed a growth of more than 7% in the past three months and also has an impressive long-term earnings growth rate of 23.8%.
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