For Immediate Release
Chicago, IL – May 18, 2018 – Zacks Equity Research highlights Discovery Communications (DISCA - Free Report) as the Bull of the Day, Taiwan Semiconductor Manufacturing Company (TSM - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onWorld Wrestling Entertainment (WWE - Free Report) and Comcast (CMCSA - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Times are changing for the global media industry, with several major companies jousting for positioning as consumers continue to search for quality original content and streaming options. These big names are getting all the attention, but interestingly enough, smaller—but still recognizable—media moguls like Discovery Communications look even stronger.
Discovery is a mass media company with a focus on non-fiction content. It operates Discovery Channel, Animal Planet, Investigation Discovery, Science, TLC, and other spin-off networks. Discovery also recently completed the acquisition of Scripps Network Interactive, which owned Food Network and HGTV, among others.
DISCA is currently sporting a Zacks Rank #1 (Strong Buy) and looks like a great option based on the strength of its content library, its improving earnings outlook, and its attractive valuation metrics.
Latest Earnings and Outlook
In its most recent quarter, Discovery saw adjusted earnings of $0.53 per share, topping our consensus estimate of $0.45. Meanwhile, quarterly revenue of $2.3 billion was in line with estimates and marked year-over-year growth of nearly 44%.
Since then, earnings estimates for Discovery’s fiscal 2018 and 2019 have been moving higher. The Zacks Consensus Estimate for the company is now calling for profits of $2.77 per share, up from just $2.43 per share in just 30 days. Over the same time, our consensus projection for the company’s 2019 earnings has moved 18 cents higher.
It is also worth noting that our Most Accurate Estimate—which only includes the most recent analyst estimates—for 2018 is 20 cents higher than the consensus. This implies that analyst sentiment has been heating up strongly recently, which is a great sign for the stock.
All in all, Discovery is expected to report earnings growth of 24% on the back of 58% revenue growth this year. Current estimates have this being followed by growth rates of 31% and 5% in 2019.
On top of its improving earnings outlook, DISCA is trading at an attractive valuation. The stock has a P/E of just 8.5, which comes at a noticeable discount to the “Broadcast Radio and Television” industry average of 11.1. Discovery also has a PEG of 0.6, so investors are clearly getting a great price for its projected earnings growth.
Bear of the Day:
Semiconductor stocks have been on fire over the past few years, but recently, investors have grown concerned that the industry’s run might be nearing its end. With concerns that the semiconductor cycle is wrapping up, it is prudent to avoid those that are already struggling—including Taiwan Semiconductor Manufacturing Company.
Taiwan Semiconductor is the world's largest dedicated integrated circuit foundry. The company manufactures ICs for its customers based on their proprietary IC designs using its advanced production processes. Most leading fabless semiconductor companies, including Qualcomm, AMD, and more, are customers of TSMC.
After a sluggish earnings report last month, TSMC is sporting a Zacks Rank #5 (Strong Sell) and looks a bit pricey for what you are getting.
Latest Earnings and Outlook
Taiwan Semiconductor most recently reported earnings on April 19. The company posted adjusted profits of $0.59 per share, missing the Zacks Consensus Estimate by a penny and moving just about 9% higher year over year. Revenue of $8.46 billion just edged out our consensus estimate of $8.45 billion.
TSMC’s outlook for the remainder of the year was not particularly encouraging, and since its report, analysts have adjusted their own estimates downward to match that. In fact, the company has seen two negative revisions to its full-year EPS estimates within the past 30 days, moving our consensus projection 15 cents lower in that time.
Shares of TSMC have fallen about 5% in the month since its latest earnings report, but the stock still looks overvalued in many ways. For instance, it is trading at about 16x forward 12-month earnings, which is a noticeable premium to the average of 13x seen in the broader semiconductor market.
Meanwhile, its P/S of 6.2, as well as its P/B of 3.8 and P/CF of 10.3, add credence to the idea that the stock is a bit pricy right now.
Semiconductor investors are worried about the cycle coming to an end, so why pay a premium for a chip supplier with a sluggish earnings outlook?
Why Was World Wrestling Entertainment (WWE - Free Report) Soaring Thursday?
Shares of World Wrestling Entertainment opened more than 13% higher on Thursday after The Hollywood Reporter said the media company is talking to other networks about airing its weekly “Smackdown” television program.
WWE currently runs both its Smackdown and “Raw” franchises on USA Network, a channel operated by Comcast’s NBCUniversal. However, the sports entertainment giant is nearing the end of its current contract and has been in talks with other networks. Now, it appears as if Raw and Smackdown will have separate homes.
“WWE's Smackdown is being shopped to various networks after NBCUniversal — whose USA Network airs the highly rated pro wrestling matches — declined to re-up its deal,” the The Hollywood Reporter said.
“NBCU is said to be focusing on renewing its pact for WWE's Raw, another wrestling franchise, and that deal is expected to close at as much as three times its current value.”
Investors clearly see these negotiations as a sign that WWE will be getting a great deal for its popular TV shows. The company is coming off a strong quarter, which saw adjusted earnings of 18 cents per share. This topped the Zacks Consensus Estimate by five cents and marked a year-over-year improvement of 125%.
License fees from the distribution of Raw and Smackdown make up a large chunk of WWE’s total revenue. This business swelled 10.6% in the most recent quarter, helping the company’s overall Media revenue surge 10%. WWE also saw a 29.8% rise in sales and advertising sponsorships across media platforms.
In recent years, investors have been excited by the growth of WWE Network, the wrestling powerhouse’s over-the-top streaming platform. WWE Network users pay a flat monthly fee to access libraries of old shows, live pay-per-view events, and additional original content.
Since its report, WWE has seen three positive revisions to its full-year EPS estimates, with one negative revisions also coming in. Consensus estimates are trending up, but this mixed activity has kept the stock at a Zacks Rank #3 (Hold). The company is currently expected to report earnings growth of 32.3% on the back of 8.1% revenue growth this fiscal year.
Still, the stock is sporting an “F” grade for Value in our Style Scores system. Even before today’s gains, WWE was trading at more than 50x forward 12-month earnings, with its P/S of 4.2 and its P/B of 12.2 also appearing stretched compared to our “Film and Television Production and Distribution” group.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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About the Bull and Bear of the Day
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