MediaWatch – January 2023

Household budgets remain under pressure and competition for market share will likely intensify during the year. That is not necessarily unmitigated bad news for the marketing industry – brands may look to spend to reinforce their positioning. The impact of inflation remains an issue, although labour shortages may be easing. Market earnings forecasts for media companies imply mid-single-digit FY23 revenue growth and margins edging up, which currently seems plausible. On our valuation screens, many media stocks are trading at substantial discounts to their long-term averages, suggesting that prices may have fallen too far or that there are further downgrades to come (or both). The widest discounts are in US interactive media and services, European cable and satellite and interactive home entertainment in both the US and mainland Europe.

MediaWatch: Introduction

This inaugural edition of MediaWatch looks at performance and changes to consensus forecasts for companies in the media sector across the UK, European and US markets. We highlight the direction of travel of revenue and EBITDA (as a proxy for earnings) estimate changes across the seven constituent subsectors, as defined by the MSCI’s Global Industry Classification Standard (GICS), for FY23 and FY24. We then look at individual stock level to see where current valuations are compared to their long-term average, using values back to 2006 to smooth out the cycle. On the basis of our screens, a large majority of stocks are trading at substantial discounts to their long-term average ratios, which indicates that pricing has fallen too far or that market earnings estimates are too high, or both.

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