KeyBanc Sees Limited Network Upside For Time Warner, Downgrades Ahead Of Q1 Results

Andy Hargreaves of Pacific Crest downgraded shares of Time Warner Inc TWX on Monday to Sector Weight from Overweight with no assigned price target.

According to Hargreaves, shares of Time Warner have gained 40 percent from its lows, and much of the growth at Turner and the positive benefits from Warner's movies are "now priced in."

Hargreaves added that he is "less bullish" on HBO's growth opportunity. Specifically, the analyst is not expecting the segment to "drive meaningful growth outside of the pay-TV ecosystem without a significantly expanded programming effort or a centralized global model."

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Finally, Hargreaves noted that Time Warner's stock is trading at 10.1x consensus next twelve-months EV/EBITDA, which is already above the peer group at 9.5x.

"Its current premium is the third-highest in the past three years, only surpassed by 21st Century Fox M&A speculation and reaction after its 2014 analyst day," Hargreaves concluded. "Higher relative valuation when combined with the likelihood for medium- to long-term margin contraction prompts us to downgrade TWX shares to Sector Weight from Overweight."