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Discovery Enhances Business in China

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Silver Spring, Maryland-based global mass media and entertainment company, Discovery Communications, Inc. (DISCA), has sealed a deal to supply its program to Wasu’s new digital subscription channel, Qui Suo. Wasu is a media and cable television company in China. However, the financial details of the deal were not revealed.

Discover Communications’ deal with Wasu seems to be the ideal platform for the former’s business expansion in China as the latter has nearly 20 million cable subscribers in China and also dominates the country’s video streaming market. Notably, according to iResearch, 450 million people watch online videos in China and the figure is expected to increase to 700 million by 2016.

We believe that Discovery Communications’ decision to enhance operations in China will improve the company’s revenues going forward. In the recently concluded quarter, Discovery Communications reported mixed financial results where the bottom surpassed the Zacks Consensus Estimate while the top line missed the same.

Discovery Communications achieved viewership growth for the fifth successive year. In the last five years, the company launched seven new channels in the U.S. Strong viewership ratings of several Discovery channels helped the company generate healthy advertising revenues.

Recently, Discovery Communications abandoned its plan to acquire Scripps Networks Interactive, Inc. (SNI). In Nov 2013, VARIETY reported that Discovery is considering a bid to acquire Scripps Networks. However, the discussion between the companies did not cross the preliminary stage as the family that controls Scripps Networks showed reluctance to the sale. The Scripps family owns a 43% stake in the company.

Other Stocks to Consider

Discover Communications currently has a Zacks Rank #3 (Hold). Other better-ranked stocks in the television broadcasting industry which are worth considering include Entravision Communications Corporation (EVC) and Phoenix New Media Limited (FENG). Both the stocks carry a Zacks Rank #2 (Buy).

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