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Discovery (DISCA) Hits 52-Week High on Portfolio Strength

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Discovery, Inc. (DISCA - Free Report) rallied to a new 52-week high of $32.99, eventually closing a tad lower at $32.86 on Oct 2. This Zacks Rank #3 (Hold) stock has a market cap of $16.94 billion.

Shares of Discovery have been witnessing an upside, appreciating 46.8% in the year-to-date period compared with the industry’s rally of 33.8%.



Discovery is well-positioned to benefit from strength in its product portfolio, which is evident from the company’s increasing advertising and distribution revenues. Notably, revenues surged 63% year over year to $2.85 billion in the last reported quarter.

Demand for content is growing day by day with customers having access to a wide variety across platforms.

To cash in on the ever-growing demand, Discovery is making related acquisitions and striking relevant deals. Its buyout of Scripps on Mar 6 is a move in the same direction.

Portfolio Strength Drives Revenues

Despite the dominance of video streaming companies like Netflix (NFLX - Free Report) , Discovery continues to hold its ground and attract users through its content offerings. This is supported by the fact that the company currently has the “second largest share of TV viewing” after Comcast (CMCSA - Free Report) owned NBC Universal.

Discovery has been successful in not only attracting worldwide viewers but also attracting advertisers. For companies like Discovery, whose advertising revenues contribute majorly to the top line, it is important to keep the numbers growing.

In the last reported quarter, advertising revenues, which contributed 54.9% of its total revenues, surged 94.2% to $1.56 billion on the back of continued monetization of digital content offerings as well as higher volumes.

Additionally, the Scripps buyout not only expanded Discovery’s product portfolio but also its international footprint, especially in regions like Europe, Latin America and the Nordics.     

Moreover, the combined entity is likely to produce around 8,000 hours of original programming content on a yearly basis, reaching people across 220 countries and territories in 50 different languages.

Deals to Boost Revenues

Discovery entered into a joint venture with The Enthusiast Network (TEN) for automotive media, which marks its entry into the direct-to-consumer offerings space. Additionally, the company has renewed its distribution partnership with AT&T (T - Free Report) , following which Discovery’s networks will be available on all platforms of DirecTV.

Moreover, Discovery recently partnered with Hulu and Sling TV to offer its content to a wider audience. This will help the company make its content available to an increasing online viewing audience.

Discovery also partnered with Bilibili to introduce “bilibili x Discovery” channel to the younger audience in China. The companies will co-produce content.

Estimate Revisions

Over the last 30 days, the Zacks Consensus Estimate for fiscal 2018 remained stable at $2.23. The Zacks Consensus Estimate for revenues for fiscal 2018 pegged at $10.64 billion, up approximately 55% from the year-ago period.

The company has a long-term expected EPS growth rate of 22.6%.

Conclusion

We believe that Discovery’s strategy to boost its customer base through acquisitions and relevant deals coupled with its portfolio strength will help it survive tough competition from leading video streaming players and cable operators.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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