A Hold recommendation has been issued to media giant British Sky Broadcasting Group (BSY), by Zacks senior media analyst Duong Vuong, CFA. Here's what his latest update had to say:
'We are initiating coverage of BSY with a Hold recommendation. The first quarter results saw a 28% drop in profit, and the continuing dispute with Virgin Media (VMED) is hurting earnings. BSkyB said investment in new high-speed Internet products, and the cost of Premier League soccer rights also added to the income decline. Net profit fell to $175 million, down from $234 million a year earlier.
'Revenue at the company rose 10.6 per cent to $2.47 billion. BSkyB's marketing expenses rose 22 per cent as it increased spending to draw new subscribers to its high-speed Internet. The company began combining broadband with TV in August 2006, tackling rival Virgin Media, which also offers combined services. It added 223,000 net new broadband subscribers in the quarter.
'BSkyB's content dispute with Virgin Media also affected profits. Virgin Media, formed by a merger this year between Richard Branson's Virgin Mobile and cable operator NTL Inc., stopped airing BSkyB's basic channels in March after the companies failed to agree on price. BSkyB said operating profit would be down by about $31 million every quarter as long as its channels were not carried by Virgin Media.
'The company is trading at a premium compared to its peers. At a P/E of 20.4 and a growth rate of 10%, the stock is trading at a PEG of 2.0. We think this is full valuation and our price target is $53.00.'
Read the full analyst report on BSY.
Read the full analyst report on VMED.
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