Meta, Alphabet and 10 under-the-radar media stocks expected to soar

The media landscape is going through a difficult transition, and it isn’t only because streaming is such a tricky business.

Companies such as Walt Disney Co.
DIS,
Warner Bros. Discovery Inc.
WBD
and Paramount Global
PARA
have made heavy investments in streaming services as their traditional media businesses wither, only to find that it is harder than it looks to emulate Netflix Inc.’s
NFLX
ability to make money from streaming.

Some of the companies are also saddled by debt, in part resulting from mergers that don’t hold the same shine in the current media landscape.

Needless to say, this is the age of cost-cutting for Netflix’s streaming competitors and many others in the broader media landscape.

Below is a screen of U.S. media stocks, showing the ones that analysts favor the most over the next 12 months. But before that, we list the ones with the highest and lowest debt levels.

All the above-mentioned media companies are in the communications sector of the S&P 500
,
which also includes Alphabet Inc.
GOOGL

GOOG
and Meta Platforms Inc.
META,
as well as broadcasters, videogame developers and news providers.

But there are only 20 companies in the S&P 500 communications sector, which is tracked by the Communications Services Select Sector SPDR ETF
.

High debt

Before looking at the stock screen, you might be interested to see which of the 53 media companies are saddled with the highest levels of total debt relative to consensus estimates for earnings before interest and taxes (EBIT) for the next 12 months, among analysts polled by FactSet. This may be especially important at a time when long-term interest rates have been rising quickly. Dollar amounts are in millions.

Company

Ticker

Debt/ est. EBIT

Total debt

Est. EBIT

Debt service ratio

Total return – 2023

Market cap. ($mil)

Dish Network Corp. Class A

DISH 1,245%

$24,556

$1,973

15%

-57%

$1,773

Madison Square Garden Sports Corp. Class A

MSGS 1,125%

$1,121

$100

-14%

-4%

$3,400

Paramount Global Class B

PARA 656%

$17,401

$2,654

-29%

-13%

$9,529

Consolidated Communications Holdings Inc.

CNSL 651%

$2,152

$331

-26%

6%

$441

TechTarget Inc.

TTGT 629%

$479

$76

16%

-36%

$788

Cinemark Holdings Inc.

CNK 616%

$3,630

$589

61%

81%

$1,908

Cogent Communications Holdings Inc.

CCOI 548%

$1,858

$339

-19%

27%

$3,388

E.W. Scripps Co. Class A

SSP 529%

$3,084

$583

80%

-42%

$552

AMC Networks Inc. Class A

AMCX 492%

$2,945

$599

26%

-29%

$357

Live Nation Entertainment Inc.

LYV 466%

$8,413

$1,805

135%

22%

$19,515

Source: FactSet

Click on the tickers for more about each company, including business profiles, financials and estimates.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

The debt figures are as of the end of the companies’ most recently reported fiscal quarters. The debt service ratios are EBIT divided by total interest paid (excluding capitalized interest) for the most recently reported quarters, as calculated by FactSet. It is best to see this number above 100%. Then again, these service ratios cover only one quarter.

Looking at the most indebted company by quarter-end debt to its 12-month EBIT estimate, it would take more than 10 years of Dish Network Corp.’s
DISH
operating income to pay off its total debt, excluding interest.

Shares of Dish have lost more than half their value during 2023, and the stock got booted from the S&P 500 earlier this year. The company has seen its satellite-TV business erode while it pursues a costly wireless build-out that won’t necessarily drive success in that competitive market. Dish plans to merge with satellite-communications company EchoStar Corp.
SATS
in a move seen as an attempt to improve balance sheet flexibility.

It is fascinating to see that for six of these companies, including Paramount, debt even exceeds the market capitalizations for their stocks. Paramount lowered its dividend by nearly 80% earlier this year as it continued its push toward streaming profitability, and Chief Executive Bob Bakish recently called the company’s planned sale of Simon & Schuster “an important step in our delevering plan.”

You are probably curious about debt levels for the largest U.S. media companies. Here they are for the biggest 10 by market cap:

Company

Ticker

Debt/ est. EBIT

Total debt

Est. EBIT

Debt service ratio

Total return – 2023

Market cap. ($mil)

Alphabet Inc. Class A

GOOGL 22%

$29,432

$133,096

711%

47%

$1,528,711

Meta Platforms Inc. Class A

META 47%

$36,965

$78,129

717%

137%

$634,547

Comcast Corp. Class A

CMCSA 266%

$102,669

$38,539

77%

33%

$187,140

Netflix Inc.

NFLX 197%

$16,994

$8,641

192%

41%

$184,362

T-Mobile US Inc.

TMUS 378%

$116,548

$30,838

32%

-5%

$156,881

Walt Disney Co.

DIS 263%

$47,189

$17,975

88%

-4%

$152,324

Verizon Communications Inc.

VZ 370%

$177,654

$48,031

36%

-11%

$140,205

AT&T Inc.

T 378%

$165,106

$43,681

31%

-20%

$100,872

Activision Blizzard Inc.

ATVI 93%

$3,612

$3,891

2159%

21%

$72,118

Charter Communications Inc. Class A

CHTR 434%

$98,263

$22,651

89%

23%

$62,380

Source: FactSet

Among the largest 10 companies in the S&P Composite 1500 communications sector by market cap, Charter Communications Inc.
CHTR
has the highest ratio of debt to estimated EBIT, while its debt service ratio of 89% shows it was close to covering its interest payments with operating income during its most recent reported quarter. Disney also came close, with a debt service ratio of 88%.

Charter Chief Financial Officer Jessica Fischer said at an investor day late last year that “delevering would only make sense if the market valuation of our shares fully reflected the intrinsic value of the cash-flow opportunity, if debt capacity in the market were limited or if our expectations of cash-flow growth, excluding the impact of our expansion were significantly impaired.”

Meanwhile, Kevin Lansberry, Disney’s interim CFO, said during the company’s latest earnings call that it had “made significant progress deleveraging coming out of the pandemic” and that it would “approach capital allocation in a disciplined and balanced manner.”

Disney’s debt increased when it bought 21st Century Fox assets in 2019, and the company suspended its dividend in 2020 in a bid to preserve cash during the pandemic.

When Disney announced its quarterly results on Aug. 9, it unveiled a plan to raise streaming prices in October. Several analysts reacted positively to the price increase and other operational moves.

Read: The long-simmering rumor of Apple buying Disney is resurfacing as Bob Iger looks to sell assets

The largest companies in the sector, Alphabet and Meta, have relatively low debt-to-estimated EBIT and very high debt-service ratios. Netflix has debt of nearly twice the estimated EBIT, but a high debt-service ratio. For all three companies, debt levels are low relative to market cap.

Low debt

Among the 52 companies in the S&P Composite 1500 communications sector, these 10 companies had the lowest total debt, relative to estimated EBIT, as of their most recent reported fiscal quarter-ends:

Company

Ticker

Debt/ est. EBIT

Total debt

Est. EBIT

Debt service ratio

Total return – 2023

Market cap. ($mil)

New York Times Co. Class A

NYT 0%

$0

$414

N/A

32%

$6,968

QuinStreet Inc.

QNST 18%

$5

$26

-153%

-35%

$513

Alphabet Inc. Class A

GOOGL 22%

$29,432

$133,096

711%

47%

$1,528,711

Shutterstock Inc.

SSTK 26%

$63

$241

39%

-20%

$1,502

Yelp Inc.

YELP 31%

$106

$344

78%

55%

$2,909

Meta Platforms Inc. Class A

META 47%

$36,965

$78,129

717%

137%

$634,547

Scholastic Corp.

SCHL 54%

$108

$201

319%

12%

$1,314

Electronic Arts Inc.

EA 73%

$1,951

$2,678

605%

-2%

$32,425

World Wrestling Entertainment Inc. Class A

WWE 93%

$415

$448

479%

66%

$9,455

Activision Blizzard Inc.

ATVI 93%

$3,612

$3,891

2159%

21%

$72,118

Source: FactSet

New York Times Co.
NYT
takes the prize, with no debt.

Wall Street’s favorite media companies

Starting again with the 52 companies in the sector, 46 are covered by at least five analysts polled by FactSet. Among these companies, 12 are rated “buy” or the equivalent by at least 70% of the analysts:

Company

Ticker

Share “buy” ratings

Aug. 25 price

Consensus price target

Implied 12-month upside potential

Thryv Holdings Inc.

THRY 100%

$21.11

$35.50

68%

T-Mobile US Inc.

TMUS 90%

$133.35

$174.96

31%

Nexstar Media Group Inc.

NXST 90%

$157.08

$212.56

35%

Meta Platforms Inc. Class A

META 88%

$285.50

$375.27

31%

Cars.com Inc.

CARS 86%

$18.85

$23.79

26%

Alphabet Inc. Class A

GOOGL 82%

$129.88

$150.04

16%

Iridium Communications Inc.

IRDM 80%

$47.80

$66.00

38%

News Corp. Class A

NWSA 78%

$20.74

$26.42

27%

Take-Two Interactive Software Inc.

TTWO 74%

$141.42

$155.96

10%

Live Nation Entertainment Inc.

LYV 74%

$84.79

$109.94

30%

Frontier Communications Parent Inc.

FYBR 73%

$15.24

$31.36

106%

Match Group Inc.

MTCH 70%

$43.79

$56.90

30%

Source: FactSet

News Corp.
NWSA
is the parent company of MarketWatch.

Finally, here are the debt figures for these 12 media companies favored by the analysts:

Company

Ticker

Debt/ est. EBIT

Total debt

Est. EBIT

Debt service ratio

Total return – 2023

Market cap. ($mil)

Thryv Holdings Inc.

THRY 227%

$433

$191

53%

11%

$730

T-Mobile US Inc.

TMUS 378%

$116,548

$30,838

32%

-5%

$156,881

Nexstar Media Group Inc.

NXST 358%

$7,183

$2,009

63%

-8%

$5,511

Meta Platforms Inc. Class A

META 47%

$36,965

$78,129

717%

137%

$634,547

Cars.com Inc.

CARS 223%

$451

$202

41%

37%

$1,253

Alphabet Inc. Class A

GOOGL 22%

$29,432

$133,096

711%

47%

$1,528,711

Iridium Communications Inc.

IRDM 306%

$1,481

$483

54%

-7%

$5,977

News Corp. Class A

NWSA 261%

$4,207

$1,611

109%

15%

$11,940

Take-Two Interactive Software Inc.

TTWO 272%

$3,492

$1,283

-40%

36%

$24,017

Live Nation Entertainment Inc.

LYV 466%

$8,413

$1,805

135%

22%

$19,515

Frontier Communications Parent Inc.

FYBR 453%

$9,844

$2,173

85%

-40%

$3,745

Match Group Inc.

MTCH 287%

$3,839

$1,337

540%

6%

$12,177

Source: FactSet

In case you are wondering about how the analysts feel about debt-free New York Times, it appears the analysts believe the shares are fairly priced at $42.60. Among eight analysts polled by FactSet, three rated NYT a buy, while the rest had neutral ratings. The consensus price target was $43.93. The stock trades at a forward price-to-earnings ratio of 27.7, which is high when compared with the forward P/E of 21.7 for the S&P 500
.

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30 years on, is the Lyon-Turin rail project still looking so green?

The high-speed Lyon-Turin rail link involves excavating what will be the world’s longest rail tunnel, but will its carbon footprint be too damaging?

The first of seven giant tunnel-boring machines was assembled at a German factory two weeks ago and, once they are all put into action in a year’s time, they will greatly speed up excavation through the base of Mont Cenis in Savoie, France.

Meanwhile, work is also continuing with the use of more traditional machinery to cut through 500 metres or so of the rock each day.

Construction workers for the state-owned Tunnel Euralpin Lyon Turin company (TELT) need to excavate enough rock to create two 57.5 km long tunnels – longer than the Channel tunnel by six kilometres.

By the time it is finally finished in 2032, it will mean fewer trucks and more trains on both sides of the border – if it is finished on time. The project has suffered many delays, mostly involving financing setbacks over the years.

But will it still be viewed as beneficial to the environment, as it was in the 1990s when it is finally finished in 2032?

Stéphane Guggino, the General Delegate of La Transalpine Lyon-Turin, supports the project:

“The urgency is, there are three million trucks passing between France and Italy every year. If you don’t dig tunnels, you keep the trucks on the roads.”

But drilling a tunnel on the French-Italian border is threatening water resources, which are under strain more than ever before, according to environmentalists.

Alberto Poggio from the Mountain Union of Val de Suse’s Technical Commission told Euronews the data speaks for itself:

“We have calculated that the construction of the entire Turin-Lyon line will result in a net contribution of 10 million tonnes of carbon dioxide into the atmosphere. Estimates indicate that 600 to 1,000 litres of water per second of water will be discharged from the tunnels during the work. 

“It’s a bit like a large part of Turin or a large part of Lyon running out of water.”

Will the TGV Lyon-Turin have a positive impact on CO2 emissions?

According to the TELT project website, “The Mont Cenis base tunnel is a priority intervention in the context of the Green Deal’s decarbonisation objectives.”

Reducing emissions is said to be at the heart of the project which has two main aims:

– To encourage rail travel by halving journey times between Lyon and Turin.

– To encourage the transfer of 25 million tonnes of freight from road to rail every year.

 This is a major challenge, given that freight accounts for 80% of traffic on the line.

At present, it takes around seven hours to reach Milan from Paris by train. With the future high-speed line, it would take two hours less. 

At this point, it’s starting to become attractive for travellers to take the train rather than the plane,” said Stéphane Guggino. At present, the Paris-Milan air route, a journey of 1h 30 minutes, is used by over 50,000 passengers a month.

The project’s promoters also believe that fast, reliable and efficient infrastructure will be an incentive for freight carriers. The aim is to transfer almost half of all traffic from road to rail.

Construction of the Lyon-Turin track will emit around 10 million tonnes of CO2, which TELT insists will be offset after the line has been in use for 15 years. After that TELS maintains, that thanks to the transfer of goods from road to rail, the infrastructure should produce results in terms of CO2 reduction. 

Over 120 years of its use, the new line is expected to save one million tonnes of CO2 equivalent per year.

These figures were revised upwards in 2020 by a report from the European Court of Auditors, which estimates that it would take a minimum of 25 years – and perhaps even 50 years if the line is under-used – to offset the emissions linked to construction.

This estimate has been called into question by Transalpine, which criticised the report’s author, Yves Crozet, economist and president of the Union Routière de France think tank, for his lack of neutrality towards the Lyon-Turin project.

For the environmentalists opposed to the project, the environmental cost of the line outweighs its usefulness in the context of the climate crisis. 

“We think we’re going to solve problems by replacing old technologies with new ones. But our planetary limits no longer allow all that,” says Green MEP Gwendoline Delbos-Corfield. “It’s also a question of reducing, being sober and no longer building useless things because their very construction causes environmental damage”.

2. Why not use the existing rail line?

The question of how to use the existing rail line is central to the debate on the Lyon-Turin TGV.

A line linking Lyon and Turin already exists. It passes through a historic 14-kilometre-long tunnel on Mont Cenis. Dug in 1871, the tunnel was renovated in 2012 to facilitate the transport of goods. It’s completely modernised. It only needs a few improvements, and it would cost much less to make them than to dig new tunnels,” said Philippe Delhomme, Co-President of the Vivre et Agir en Maurienne Association.

According to the project’s opponents, this “historic line” is under-used. NGO Les Amis de la Terre, the Vivre et Agir en Maurienne Association and the La France party have argued that the existing line would be “capable of ensuring a massive modal shift of 16 million tonnes per year, equivalent to the weight transported by one million heavy goods vehicles” – the target set by TELT.

However, it argues 162 freight trains will be able to pass through the new tunnel every day, compared with the 50 or so that currently travel daily on the existing line.

3. What impact will the project have on water resources?

The drying up of water resources is the most divisive aspect of this project.

One of the main challenges is the limited availability of this vital resource in the regions crossed by the project. In fact, the areas affected by the construction project are already experiencing a reduction in the flow of water as a result of climate change.

On the one hand, a project of this scale is extremely water-intensive. The construction of tunnels and railroads requires large quantities of water for earthworks, concreting and washing materials. This demand has a significant impact on existing reserves, further jeopardising the water supply of local communities and the surrounding ecosystem.

“But the water needed to build the tunnel is derisory compared to the amount of water wasted due to the interception of natural resources during excavation operations”, explained Alberto Poggio, an engineer and member of the Technical Commission of the Montana Union of Val di Susa.

The greatest danger is excavation. By drilling in the mountains, we risk drawing on natural water reservoirs. In a 2021 report, TELT confirmed that some of these resources were under threat. The water extracted would not be used in the work but would be taken out through the galleries to avoid flooding.

4. How will the landscape be affected?

The Alpine landscape that crosses the French-Italian border is already visibly affected. “In the Val di Susa, quality of life has become problematic from several points of view,” explains Alberto Poggio. “The presence of construction sites is starting to become a nuisance, from the point of view of materials and for the environmental impact noted by controls which are rather small but, are starting to indicate criticalities”, continued the expert.

According to the engineer, the landscape is also compromised by the presence of landfill sites where the materials used on the sites are stored: “When I do an excavation, what comes out, the crushed rock, has to be permanently disposed of. Part of this elimination has been achieved by dumping the material in identified areas of the same valley. This has already happened in the Maurienne and also at the Maddalena di Chiomonte site, where an auxiliary tunnel was dug and the waste used was dumped alongside it on a permanent basis”.

It’s the same scenario in France: “Meadows have been gutted, forests have already been razed to store future waste”, explains Philippe Delhomme. “Small villages are seeing more trucks transporting waste or goods, and are obviously upset by the dust, the noise… As the crow flies, I’m 1.4 kilometres from a waste disposal site. Well, I can hear the trucks, I can hear the noise of the machines. It’s no longer possible to accept this today.”

And farmland is at risk too. “We’re in a Beaufort zone which stipulates that 70% of the fodder needed to make this cheese for livestock is indispensable, and it can only be indispensable if the meadows are irrigated. But with less water, irrigation won’t be possible”, commented Philippe Delhomme.

But for TELT and its supporters, these are issues that need to be put into perspective.

“When you build infrastructure, there is always an ecological impact, that’s obvious. It is a reality, Stéphane Guggino said. “But these ecological impacts must be measured against the ecological benefits, over the very long term and from this point of view, it is always positive.”

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Swiss claim record for world’s longest passenger train


A Swiss railway company claimed the record for the world’s longest passenger train Saturday with a trip on one of the most spectacular tracks through the Alps.

The Rhaetian Railway company ran the 1.9-kilometre-long train composed of 100 coaches along the Albula-Bernina route from Preda to Bergün.

The route was designated a UNESCO World Heritage in 2008 and leads through 22 tunnels, some of which spiral through mountains, and across 48 bridges, including the curved Landwasser Viaduct.

“We have a jubilee of 175 years of Swiss Railways, and this world record attempt should be one big event of this jubilee”, explained Rhaetian Railway’s CEO, Dr Renato Fasciati.

“But actually, the reason was that we had some troubles during corona crisis (COVID-19 pandemic), so we lost 30% of our turnover for guests on the train and so we tried to find a good event in order to increase the awareness of our beautiful UNESCO’s World Heritage route.

“And so this world record attempt is a wonderful reason and a wonderful instrument for us to show the world this beautiful railway”, he added.

The entire journey took over an hour. Rail enthusiasts lined the valley to watch the train’s 25 sections wind their way through the Alps.

“The scenery is like the Indian summers so you see these golden trees in this beautiful valley, we have this railway line with a lot of viaducts and this spiral of tunnels… It’s a viaduct with a radius of 100 metres, and then the line goes directly into a rock face, into a tunnel and this is really fantastic” said Fasciati.

“And so we have people from all over the world just coming and seeing this beautiful line using the glacier or the Bernina Express trains”, he concluded.

Fasciati is hoping when people in other countries see the beauty of the countryside during the train’s record-breaking attempt, they too will be drawn to this region of Switzerland.



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