Pivotal Research Group upgraded Discovery Communications Inc. (NASDAQ: DISCA) in early June to a bullish stance, and investors who bought at the time were rewarded with a 30-percent return in two short weeks.
Analyst Brian Wieser downgraded Discovery Communications from Buy to Hold with an unchanged $28 price target.
An upgrade of Discovery in early June was "opportunistic," and Pivotal's prior price target increase from $24 to $28 was based on a more positive view of expected synergies from the Scripps transaction, Wieser said in the upgrade note. (See the analyst's track record here.)
Discovery shares have soared since the upgrade to the point where a bullish stance is no longer justified, Wieser said.
Multiple "legitimate concerns" surrounding the stock remain, the analyst said:
- A reliance on a small number of core network brands.
- Investor perceptions, warranted or not, of the "death of TV advertising."
- A deceleration in pay TV subscription growth or average revenue per user.
It is unlikely any larger media property sees an urgent need to pursue an acquisition of Discovery, Wieser said.
The company is still in a position to generate returns to investors, but with the stock trading near $28 per share, prospective buyers may be overpaying, the analyst said.
Shares of Discovery Communications were trading lower by 1.5 percent at the time of publication Monday morning.
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Exploring An Upgrade On Discovery Communications, Questions Remain
Latest Ratings for DISCA
|Jun 2018||Pivotal Research||Downgrades||Buy||Hold|
|Jun 2018||MKM Partners||Upgrades||Neutral||Buy|
|Jun 2018||Pivotal Research||Upgrades||Hold||Buy|
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