Can't escape OTT: The future of Affiliate Fees remains the #1 topic and we'd say that perspectives may be shifting ever so slightly from 'fairly negative' to 'kinda tepid' in terms of Affiliate revenue growth viability for most large cap stocks. The composition, price and success of digital streaming options are likely to be a major driver of future valuations. This will likely be a key topic on Q2 conference calls, potentially with added poignancy if Q2 multichannel sub adds are seasonally weak as is typical.
DIS - what breaks the funk? Nearly every investor was interested in what everyone else thinks about Disney. Our sense is that non-holders have limited conviction to buy based on ESPN risk vs Studio strength. Holders remain frustrated that cable subs remain such a big issue in light of how good the slate has been, and Shanghai looking impressive. We think Disney will remain somewhat range-bound at $95-$105 until it outgrows the ESPN pressures, which is unlikely to be in 2016.
TWX moves up the ladder: Time Warner was one of the more talked about stocks as we think it's now considered the relative 'safe haven' of the group on account of DIS facing the above narrative, Fox more exposed to Europe and CBS mingled with Viacom headlines. We think the stock remains inexpensive on 11.5x CY17E P/E so investors with a value bias like the mix of assets, divi growth and potential for a takeout.
Discovery - it's me and you kid: Investors were keen to hear our contrarian Outperform view on DISCA, but we didn't get the impression they were quite sold. Confidence thus remains low about the outlook. Q2 results are likely to prove a big test for management to either prove us right or reinforce the bear thesis.
CBS+Viacom - are they ever ever ever getting back to together? Most investors we spoke to were in favor of a combo, which surprised us a bit. They think NewCo makes sense and they think Les would be perfect for the job. The discussion is already shifting as to whether this would spur further industry consolidation.
Click here for conflict of interest and other disclosures relating to The Walt Disney Company, Time Warner Inc., CBS Corporation, Viacom Inc., Discovery Communications, Inc., Twenty-First Century Fox, Inc.,