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NFL ratings are down 7% YOY through the first 5 weeks of the season and equities analysts have begun to account for the audience decline in their Q1 ’18 projections for Twenty-First Century Fox (FOXA). Credit Suisse has lowered its price target (to $35, from $37) and earnings per share (to $.46, from $.48) forecasts for the company, based on “soft NFL ratings and the risk that the Sky transaction is blocked by UK regulators.” FOXA has been trying to acquire the 61%, that it currently does not own, in European cable service Sky (SKYAY). FOXA will release its Q1 ’18 earnings report on November 8th.
Howie Long-Short: Ratings have been steadily declining, particularly with the U-35 audience since 2010 (30%), so any prognostications stating a rebound was coming were simply based on hope and prayer. Analyst Omar Sheikh wrote “if ratings do not improve materially, we see a potential headwind to domestic advertising revenues in Q2/Q3 ’18.” Ratings aren’t improving, so investors should be expecting disappointing revenue figures from its NFL programming into Q3 ‘18. Please note that despite the lowered expectations, the $35 price target represents a 34% increase from the close on Wednesday.
Fan Marino: You can blame the ratings decline on Hurricane coverage and political movements, but that is short-term noise. A longer-term issue, that doesn’t get nearly enough coverage, is the lack of star talent the league has developed over the last decade. In the 90s and 00s, when league popularity exploded, there were an abundance of star QBs and RBs. The concept of a “feature back” no longer exists and look at the league’s Top 10 in passing yards, 7 were drafted in 2005 or earlier. Where is the star power?
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