Stifel Upgrades Scripps To Buy, Sets $75 Price Target

Stifel’s Benjamin E. Mogil believes Scripps Networks Interactive, Inc. SNI gains affiliate fees from only two channels, while the large addressable markets for these channels are likely to aid OTT MVPD carriage discussions.

Mogil upgraded the rating on the company from Hold to Buy, with a price target of $75.

Affiliate Trends

“Our view is predicated on stronger than expected domestic advertising trends, which increase our estimates above FY guidance, coupled with our view of above peer group underlying affiliate fee growth,” the analyst explained.

Mogil mentioned that the above peer underlying affiliate trends in the mid to high single digits in 2016 is being masked by the rate card harmonization from the two large mergers.

The analyst expects Scripps Networks to see stronger core affiliate trends in 2017, as the impact of the mergers lapse and the late 2016 contracts become effective.

“We believe that the concerns over the company's core fully distributed channels not being part of going forward OTT MVPD bundles, notably Hulu, is likely overblown,” Mogil stated.

Estimates

The analyst mentioned that the Q2 estimates had been left largely unchanged, given the stronger domestic advertising being partially offset by increased programming and promotional costs.

However, the full year estimates have been raised to reflect the increase in advertising in Q2 being mostly incremental, rather than a shift from 2H16.

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