Needham & Company Starts Discovery Communications (DISCA) at Hold
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Price: $79.11 -1.11%
Rating Summary:
5 Buy, 12 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 28 | New: 14
Rating Summary:
5 Buy, 12 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 28 | New: 14
Trade DISCA Now!
Needham & Company initiates coverage on Discovery Communications (NASDAQ: DISCA) with a Hold.
Needham analyst says, "DISCA is priced for perfection. DISCA is valued on the forward year (2011E) at a P/E of 20x, an EV/EBITDA of 11x, an EVFCF of 19x and a 6% FCF yield. DISCA trades at more than a 50% premium to the other companies we follow on most metrics...ROIC Issues: Simply adding one datapoint, DISCA, to our media regression analysis lowers the R2 from 83% to 76% because DISCA’s valuation is so far above the regression line. We estimate that DISCA’s ROIC will grow by about 250 basis points in FY11 (from 12.3% to 14.8%). DISCA’s WACC (weighted average cost of capital) should remain at about 9.1%. Since ROIC>WACC, this implies that DISCA is creating value in FY11, but because it is valued so far above the (typically >80% correlated regression) line we worry that the market is already discounting all of this improvement in today’s share price implying anemic share price upside over the next 12 months."
For more ratings news on Discovery Communications click here and for the rating history of Discovery Communications click here.
Shares of Discovery Communications closed at $42.71 yesterday, with a 52 week range of $27.69-$45.42.
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Needham analyst says, "DISCA is priced for perfection. DISCA is valued on the forward year (2011E) at a P/E of 20x, an EV/EBITDA of 11x, an EVFCF of 19x and a 6% FCF yield. DISCA trades at more than a 50% premium to the other companies we follow on most metrics...ROIC Issues: Simply adding one datapoint, DISCA, to our media regression analysis lowers the R2 from 83% to 76% because DISCA’s valuation is so far above the regression line. We estimate that DISCA’s ROIC will grow by about 250 basis points in FY11 (from 12.3% to 14.8%). DISCA’s WACC (weighted average cost of capital) should remain at about 9.1%. Since ROIC>WACC, this implies that DISCA is creating value in FY11, but because it is valued so far above the (typically >80% correlated regression) line we worry that the market is already discounting all of this improvement in today’s share price implying anemic share price upside over the next 12 months."
For more ratings news on Discovery Communications click here and for the rating history of Discovery Communications click here.
Shares of Discovery Communications closed at $42.71 yesterday, with a 52 week range of $27.69-$45.42.
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