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Pandora (P) and Scripps Networks Interactive (SNI) are Top Entertainment & Internet Stock Picks for 2014 - Needham & Company

December 23, 2013 12:29 PM EST Send to a Friend
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Price: $24.16 -1.47%

Rating Summary:
    23 Buy, 15 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 10
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Needham & Company analyst Laura Martin has two top Entertainment & Internet stock picks for 2014 - Pandora (NYSE: P) and Scripps Networks Interactive (NYSE: SNI). These two could be worth paying attention to given last year's pick Yahoo! (NASDAQ: YHOO) rose 96% in 2013, compared with 22% for the S&P 500 ex-dividend. The prior year's picks were also huge winners - AOL (NYSE: AOL) rose 132% and CBS (NYSE: CBS) rose 32% compared with the S&P 500, which was up about 11%

Commenting on why she likes Pandora, Martin explains: "For the online content companies we follow, we believe mobile monetization will be the most important value driver in 2014. With 60% of total revenue generated by mobile devices in 3Q13, we believe Pandora is a great way to participate in this valuation trend."

She adds, "The premium afforded to solving the "mobile monetization puzzle" is well deserved, in our view, because the ability to monetize on mobile devices raises the option value on global revenue streams, since much of the world’s access to the internet is via smartphones. Global revenue stream optionality elongates the visible revenue growth trajectory of a company, and raises the ultimate payout potential of the option. Also, risk falls as a company’s share of mobile revenue rises because the lack of mobile revenue raises the risk that a new entrant can better execute the "job to be done" on mobile devices, making the incumbent irrelevant over time."

On Scripps Networks Interactive, the analyst said consolidation will
be the single most important valuation theme in 2014. The want to be overweight
companies sellers and and underweight buyers in 2014. "Because we expect large online companies to enter the bidding for premium content companies (Google’s talks with the NFL is one example), we believe investors should overweight likely acquisition candidates more heavily than they underweight potential purchasers. We see SNI as the most likely candidate for acquisition, owing to its small size, high quality cable networks (Food, Travel, Home & Garden), untapped international expansion potential, and affiliate fee upside potential."




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