Comcast Corp. (CMCSA) and News Corp. (NWS) are among the favorite media stock plays of Doug Mitchelson, Managing Director and Senior Equity Analyst at Deutsche Bank Securities Inc. Cable stocks, he says, have had done well but continue displaying attractive valuations and the potential to return capital favorably, and NWS‘s networks are doing well.
“For cable and satellite, our top pick has been and continues to be Comcast, which has been growing revenue and EBITDA in the 5% to 6% range, sometimes higher, which has been well above the average industry growth,” Mitchelson said. “We also believe that there is a potential for return to margin expansion in 2014 and beyond as its high-margin telecom revenue grows to be a bigger and bigger percentage of its base.”
On the media side, Mitchelson also likes News Corp., Rupert Murdoch’s company. Mitchelson says the company is simplifying its business and projects income growth, and buybacks could be beneficial for shareholders.
“In media, our top pick is News Corp., where we see 11.5% fiscal 2013 operating income growth, buybacks that could total 6% to 7% of shares outstanding, and the split off late next spring of its publishing group into a separate publicly traded company, which could spark a re-evaluation of the company given it will remove the slower-growing publishing businesses from their fast-growing television businesses,” Mitchelson said.
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