Discovery Communications Inc. (NASDAQ: DISCA)'s reported interest in buying Twenty-First Century Fox Inc (NASDAQ: FOXA)'s regional sports networks has resulted in an "unnecessary" decline in Discovery's stock, according to Imperial Capital.
Market reports of Discovery's interest in buying Fox's RSNs are inaccurate, Miller said, naming the following reasons why he said Discovery is unlikely to bid on the Fox assets. (See the analyst's track record here.)
- Discovery continues to integrate Scripps Networks, which it just bought last year for nearly $12 billion.
- The company is in the process of selling its Maryland headquarters and moving to New York City.
- Discovery has already allocated $2 billion in additional sports rights.
- The company is experiencing ratings issues at its core Discovery Channel.
- Fox's 22 RSNs nationwide would fetch a price tag of around $18.4 billion, but Discovery has already allocated nearly all of its cash flow to lower debt.
Regardless of who buys Fox's assets, the winning bidder would face multiple secular problems, including cord-cutting.
Discovery clearly has "enough on its plate" and it is safe to assume it has no additional interest in aggregating sports rights, the analyst said. Investors may want to consider taking advantage of the recent weakness in the stock as a good opportunity to either establish a new position or, for longer-term shareholders, to add to their stake and lower their base cost.
Shares of Discovery Communications were trading up 0.44 percent at the time of publication Tuesday morning at $27.54.
Imperial Capital Says Patience Will Pay Off For Discovery Communications Investors
After 30% Gain, Pivotal Says The Time To Buy Discovery Communications Has Passed
Latest Ratings for DISCA
|Jun 2018||Imperial Capital||Initiates Coverage On||Outperform|
|Jun 2018||Pivotal Research||Downgrades||Buy||Hold|
|Jun 2018||MKM Partners||Upgrades||Neutral||Buy|
View More Analyst Ratings for DISCA
View the Latest Analyst Ratings
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