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TV stocks get pummeled amid Trump comments, carriage disputes, ad worries


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TV stocks get pummeled amid Trump comments, carriage disputes, ad worries

While the broader markets were fairly quiet this week, with the S&P 500 index up less than 0.2%, media and communications stocks traded with volatility, mostly ending the week in the red.

Traditional television names were particularly out of favor, and naturally, comments from U.S. President Donald Trump about revoking NBC (US)'s broadcast license did not seem to settle markets.

Investors sold out of NBC-owner Comcast Corp. in particular, driving that stock down 5.3% for the five trading days ended Oct. 13, but losses occurred across the broadcast and multichannel video programming distributor space.

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Charter Communications Inc., another cable operator, also shed some weight as investors watched the company grapple with Viacom Inc. in a carriage dispute.

Those two companies are running up against an Oct. 15 deadline to renew their contract, which delivers Viacom's 23 networks to Charter's entire 16 million-plus subscriber base. Standing in the way are tiering issues, as Charter relocated key Viacom networks to a higher-priced package for new customers. Viacom claims the carrier did not have the contractual right to re-tier its networks, and the companies failed to resolve the issue by the close of the week.

Charter shares slipped by 2.7% for the five trading days ended Oct. 13, while Viacom shares were off by 4.2%.

Looking beyond Viacom to other network owners, Guggenheim analyst Michael Morris raised concern for the TV advertising business when he lowered his rating of AMC Networks Inc. to "neutral" from "buy," citing concerns that advertising growth trends could see pressure from shifts to digital video. Echoing a downside scenario that has reverberated through the hallways of TV networks and distributors alike, Morris focused on AMC and slashed its price target to $60 from $73.

AMC shares were down 5.5% for the trading week. But it was not the only network owner to absorb big market-cap losses. For example, Discovery Communications Inc. was off by over 10%.

Elsewhere in the TV industry, vertically integrated behemoth Walt Disney Co. made some important strategic moves during the week, announcing an imminent Movies Anywhere service. The digital platform will include feature films not just from Disney's sprawling brands like Marvel and Pixar, but also from its peers, including Sony Pictures, Universal Pictures, 20th Century Fox and Warner Bros. The platform will also link video accounts across Inc., Alphabet Inc., Apple Inc. and others.

Further, Disney was named as a possible acquirer for SeaWorld Entertainment Inc. The aquatic parks company reportedly heard an M&A pitch from U.K. based Merlin Entertainments Plc, and analysts argued that if SeaWorld is selling, U.S. entertainment companies such as Disney and Comcast's Universal Studios might also consider bidding.

Lastly, Disney began some housekeeping at its broadcast unit, launching layoffs under the Disney/ABC Television Group that will reportedly be less than 10% of the unit's workforce.

With different read-throughs working in a larger context of bearishness on TV names, Disney shares closed the week off by 2.7%. For its part, potential M&A target SeaWorld ended down 1.3%.

Elsewhere, theater owners again lurched in what has been a very volatile year for the industry. While disappointing summer box office sales had driven stocks down, September unleashed record-breaking title "It," leading to record sales for the month and share-price gains. Now, though, September's momentum looks unsustainable, as expectations for the high-budget sequel of 1982 sci-fi classic "Blade Runner" failed to materialize. Weekend forecasts for the Oct. 6 wide release of "Blade Runner 2049" ran as high as the $50 million range, but fell far short with a $32.8 million opening weekend.

Theater stocks took another plunge during the week, led downward by AMC Entertainment Holdings Inc., which traded off by 9.5% for the five days ended Oct. 13.

Looking at a new media company, Snap Inc. launched upward during the week as Credit Suisse analyst Stephen Ju raised his price target on the company to $20 from $17 and TheStreet's celebrity investor Jim Cramer latched onto the rare moment of optimism for the niche social media upstart. Ju argued that advertisers are warming up to Snap, raised his daily active user estimates for the Snapchat platform and reiterated his "outperform" rating on the company.

After trading down about 40% since its March IPO, Snap shares added 11.6% during the five-day trading week ended Oct. 13.