MediaWatch – Encouragements and frustrations

The glimpses of positivity that we alluded to in our last quarterly update may be broadening out into wider vistas, but markets are not yet entirely convinced. The prospects of lower interest rates are gently tipping the balance and the more stable geopolitical outlook (at least in the UK) has set the backdrop for the most encouraging IPA Bellwether report for a decade. Q2 corporate reporting to date has favoured scaled participants (Netflix, Informa and Publicis particularly stand out in their markets). Across the markets for which we examine the data, the balance of upgraded and downgraded earnings forecasts is looking more stable as we move into the seasonally stronger H2. Yet the seeming unwillingness of markets to acknowledge the media sector’s value and opportunities is prompting some boards of larger groups to look at unbundling their assets to reduce the level of discount. Our analysis highlights those stocks trading below their long-term average ratings, and we have also added a further screen that gives some indication of relative value, by comparing prospective EV/sales multiples (including leases) with EBITDA margin.