Is 21st Century Fox The Only Media Stock Worth Buying?

In a note released on Wednesday, BMO Capital Markets said Twenty-First Century Fox Inc FOXA remains the only cable-heavy media stock it recommends.

The Rationale?

Analyst Daniel Salmon attributed the opinion to the continued relative outperformance in affiliate fee growth and his view that the accretive Sky deal will close, presenting new OTT opportunities for consumers.

Q1 Recap

Salmon noted that the company's first-quarter adjusted earnings per share, cable networks OIBDA and filmed entertainment OIBDA exceeded estimates, while television OIBDA missed estimates.

BMO Capital Markets continues to believe the domestic cable can harvest programming investments, eke out subscriber growth and maintain steady ad trends, driven by Fox News rating strength. Additionally, the firm feels international results would stabilize post-India demonetization impact.

Best Positioned

According to the firm, Ofcom approval of the Sky deal would be a potential catalyst. Although the firm named CBS Corporation CBS as its preferred Media stock, it believes Twenty-First Century Fox is best positioned to grind it out among the more cable-heavy names, excluding Time Warner Inc TWX, which has agreed to be acquired by AT&T Inc. T.

Maintaining At Outperform

BMO Capital Markets has an Outperform rating and $36 price target for the shares of the company.

Giving the rationale for the rating, the firm said, "Our Outperform rating is underpinned by leadership positions in the most stable areas of the linear pay TV ecosystem: a broadcast network benefiting from retransmission fee growth, a strong live sports franchise, and most importantly, a domestic cable network portfolio that includes newer networks with growing subscriber bases and/or per sub fees."

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