Analysts downgrade Nine on profit warning
Profit warning prompts media analysts to cut financial forecasts and target price on Nine Entertainment.
Media analysts have cut their financial forecasts and target price on Nine Entertainment following the media group's profit warning, amid a difficult advertising market.
The cuts, which were led by UBS, JPMorgan and Macquarie, were largely on the back of weak television and radio advertising markets.
Nine revealed on Tuesday, in conjunction with its annual shareholder meeting, that the metro free-to-air television market fell 6.4 per cent in the first quarter from a year earlier, “pretty much in line with the overall ad market”.
Based on the metro free-to-air TV market finishing down in “mid-single digits” for 2020 financial year, Nine expects to report “low single digit growth” in underlying earnings, before the impact of accounting rule changes. That's below its forecast in August for annual underlying earnings growth of 10 per cent.
Just days after completing its acquisition of Macquarie Media, Nine boss Hugh Marks said radio had “experienced similarly soft market conditions in the current half exacerbated for Macquarie by the advertiser boycott around the Alan Jones’ program" on 2GB in Sydney and 4BC in Brisbane.
READ MORE: Karl Stefanovic ‘fired up’ for Today return | Nine CEO Hugh Marks flags more changes at Macquarie Media
Mr Marks also defended the reinstatement of Karl Stefanovic to its TV networks beleaguered breakfast show Today next year, saying he is refreshed and “fired up”.
The media company confirmed Stefanovic’s return as co-host of Today, along with new on-air partner Allison Langdon. The Australian’s Media Diary reported on Thursday that he would return if he took a big pay cut.
Today, fronted by Georgie Gardner and Deborah Knight this year, has failed to make any ratings inroads against rival Sunrise this year, despite the show's overhaul following Stefanovic's axing last year in December.
JPMorgan analyst Eric Pan has downgraded his 2020 underlying earnings and revenue forecasts by 5.6 per cent to $472 million and 1.5 per cent to $2.38 billion, respectively. Pan has also cut his forecasts for the 2021 financial year, and price target by 7.8 per cent to $2.35 "due to the steeper than expected declines in metro FTA industry ad spend".
UBS's Eric Choi, Tom Beadle and Minnie Tong have slashed their earnings per share forecast by 10 per cent to 0.11 cents for the year to June, and cut its 12 month price target by nearly 7 per cent to $2.00.
Local investment bank Macquarie has downgraded its EPS forecasts for the current financial year by 5.7 per cent, and the next two by 4.4 and 3.8 per cent, to reflect weaker FTA ad markets. It has also cut its 12-month target price by 2.4 per cent to $2.05.
Nine shares, which hit a six month low of $1.70 on Tuesday after its profit warning, were down 1.2 per cent to $1.72 on Wednesday afternoon.
Seven's shares are down nearly 3 per cent to 43 cents after it forecast on Wednesday that its annual underlying earnings will be at the lower end of its guidance of $190m to $200m, which excludes its proposed acquisition of Prime Media and the sale of its Pacific Magazines and Redwave businesses.
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