UBS Downgrades Discovery Communications To Sell

In a report published Tuesday, UBS analysts downgraded Discovery Communications Inc. DISCA from Neutral to Sell. The price target was lowered from $33.00 to $30.50. Given that the FCC/DoJ has denied the acquisition of Time Warner Cable Inc. TWC by Comcast Corporation CMCSA, the latter company is likely to now focus on strengthening its fundamentals. This could spell bad news for Discovery Communications. With Discovery Communications' renewal coming up, the analysts believe that "DISCA would have been in a superior negotiating position had the CMCSA/TWC merger still been under review at June 30th, when the CMCSA renewal is up, but the earlier termination of the deal has exposed renewal risk." For now, the analysts believe that there is a 50 percent possibility the renewal is completely uneventful and the concerns are overdone. However, there is also a 50 percent probability of flat-to-down pricing on the Comcast/Discovery renewal.