As the media landscape is continuously altered by the emergence of new trends and technologies, new opportunities appear. Time Warner Cable Inc (NYSE:TWX), The Walt Disney Company (NYSE:DIS) and Twenty-First Century Fox Inc (NASDAQ:FOX) are three global media giants that could certainly seize them. Lets take a closer look at them and see if there’s room for this stocks in your portfolio:
Stock of steel
Time Warner Cable Inc (NYSE:TWC) is a prominent media and entertainment company and posses the largest pool of content and distribution assets in the industry. Its portfolio of cable networks, which includes HBO, the most widely distributed pay TV service in the US, and other popular cable networks like TNT and CNN, generates about 70% of Time Warner’s overall cash flow. The Warner Bros film and TV studios, which generates about 20% of the firm’s overall cash flow, has been outperforming other major studios such as The Walt Disney Company (NYSE:DIS) and Twenty-First Century Fox Inc (NASDAQ:FOX) on annual movie revenues and number of original TV shows.
Time Warner Cable Inc (NYSE:TWC) has substantial international presence, for instance, it distributes its cable networks to over 190 countries, which analysts believe will drive future growth for the company. In particular, the firm has recently partnered with China Media Capital, China’s main media investment fund, seeking to expand its presence in that market. With its vast and renowned content portfolio, Time Warner is likely to benefit from China’s fast growing media market.
The company has been working on expanding its digital presence, a smart move as consumers shift to different devices to enjoy media content. In this line, it increased the reach of HBO’s streaming service to mobile devices, partnered with Apple to offer iPad edition of the firm’s magazines, and acquired Flixster, a popular movie search app.
Time Warner Cable Inc (NYSE:TWC) trades at $62 or 18 times its earnings, around the industry average, having experienced a 30% growth during 2013. The firm’s first quarter announcements showed strong bottom-line results that surged around 22% year-over-year. Moreover, the company has been returning much of its free cash to shareholders via dividend and share repurchases. In February, its quarterly dividend was raised by 11% and now holds a 1.76% yield
The Walt Disney Company (NYSE:DIS) is a diversified world-renowned entertainment company. The firm’s media networks, which include the sports giant, ESPN, and other channels like ABC and Disney Channel, are the backbone of the company, generating over 50% of Disney’s operating profit. Its parks and resorts are the second contributors to the company’s performance, generating 30% of its revenue.
The Walt Disney Company (NYSE:DIS)’s media networks have been performing strongly lately, and continue to boost the firm’s top and bottom lines. Second quarter results showed a 6% year-over-year increase in the segment’s revenues, to $4,957 million. More importantly, the segment’s prospects look solid. ESPN, which contributes over 75% of cable network sales, remains the favorite network for sport lovers and lacks any significant competition on the horizon. Also, Disney has established several content distribution agreements (with Netflix and Comcast, among others) that have added more platforms to deliver its content.
As a world-known brand with an impressive portfolio, the company has ample growth opportunities in the international market, where it generates about 25% of its sales. The Walt Disney Company (NYSE:DIS) has already increased its operations in several emerging markets, including Russia, China and India. Moreover, in China, Disney came up with a Shanghai Disney theme park and resort, slated to open in 2016.
On the down side, I’d be concern about two issues: (1) as advertising remains an important source of revenue for The Walt Disney Company (NYSE:DIS), the firm is quite vulnerable to the macroeconomic headwinds, and (2) technology and piracy are certainly modifying the media economic environment, which could hurt the company’s revenues if it fails to be smart and adapt to the changing environment.
Trading at $64 or 19 times its earnings, at a 5% premium to the industry average, it has gained almost 30% during 2013. The management has been actively returning much of its free cash to shareholders; during the last fiscal year-to-date, the firm bought back $2 billion worth of shares. Furthermore, the quarterly dividend was increased by 25% in November, reaching a 1.16% yield.
The Fox is free
Twenty-First Century Fox Inc (NASDAQ:FOX) is the more profitable arm of Rupert Murdoch’s media empire, and has recently been split as an independent company from News Corporation, holding a market capitalization of $70.4 billion. The firm has a vast business portfolio consisting of various cable, broadcast, film, pay TV and satellite assets, which include its famous filmed entertainment studio, the Fox television network, and a large library of internationally popular programming (from “The Simpsons” to “Star Wars”).
Twenty-First Century Fox Inc (NASDAQ:FOX) cable network business has been performing strong and offers good prospects. Fox News has been gaining market share at the expense of its main competitor, Time Warner Cable Inc (NYSE:TWC)’s CNN, and is expected to produce affiliate fee increases over the next several years. Furthermore, spread across the US markets, the firm’s regional sports networks have carved a profitable niche by acquiring local broadcasting rights for baseball and basketball teams and college sports.
In the sport segment, the upcoming launch of Twenty-First Century Fox Inc (NASDAQ:FOX) Sports 1 in mid August, which seeks to challenge ESPN as the dominant sport network, should be particularly exciting to investors.
Trading at $30 or 12 times its earnings, at a 32% discount to the industry average, Twenty-First Century Fox Inc (NASDAQ:FOX)’s stock has surged around 5% since its spinoff. Being more focused, and freed from the low-revenue publishing business, it appears to be a good time to take this stock seriously.
Although these three stocks have been performing soundly and are tied to well-managed companies, my bet here is on Twenty-First Century Fox Inc (NASDAQ:FOX). Why? Because it looks fairly undervalued, it has promising opportunities ahead and doesn’t have to carry with the publishing business anymore. Plus, it has Rupert Murdoch.
Damian Illia has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney.
The article Media Giants Can Make FOXy Investments originally appeared on Fool.com.
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