Credit Suisse reviews European media stocks; downgrades Pearson

22nd Nov 2016 10:12

(ShareCast News) - Credit Suisse updated its ratings and initiated on stocks in the European media sector.The Swiss bank upgraded RELX from 'neutral' to 'outperform' and bumped up the price target to 1,600p from 1,370p. It said the company's high-quality assets with market-leading positions have led to improving organic growth which should be sustained. In addition, it pointed to cyclicality, almost no advertising exposure and a pragmatic approach to capital allocation.CS initiated coverage of Sky was at 'outperform' with a price target of 980p. Whilst the analysts acknowledged legitimate concerns over competition from incumbents like BT and over the top players who broadcast their media over the internet, they argued that these threats are overdone. CS said its proprietary survey shows the high degree of complementarity between OTT and Sky."The group is defensive, we see opportunities outside the UK and in mobile and believe being underweight post the recent underperformance and given weaker sterling is unwise."Credit Suisse started WPP at 'outperform' with a 2,000p price target. The bank said it likes the platform agnostic, globally diverse nature of the Global Advertising Agency space and expects low single-digit organic growth with modest margin expansion. However, it highlighted challenges including price pressures from zero-based budgeters, competition from consultants in digital and the industry debate around transparency.The bank reiterated its 'neutral' stance on Daily Mail and General Trust but lifted the price target to 830p from 750p. With uncertainty around the new chief executive's strategy, still-challenged end markets and structurally declining print, the analysts reckoned the current valuation looks fair.CS downgraded UBM from 'outperform' to 'neutral' but the price target was raised from 725p to 755p. It said the company is the only pure play asset of scale in the attractive events sub-sector but post a re-rating the valuation is broadly fair given below-peer group growth.The bank initiated Informa at 'neutral' rating with a 700p price target. New management is mid-way through a turnaround focusing on US events and improving performance in its other divisions, however, execution risks mean the valuation fairly reflects its earnings per share growth profile.Credit Suisse downgraded education publisher Pearson from 'neutral' to 'underperform' and the price target dropped to 740p from 840p. Whilst consensus is around 11% behind company guidance, multiple headwinds, poor visibility and a history of profit warnings leaves the group's valuation looking too steep.CS initiated coverage of French advertising and public relations company Publicis at 'underperform' with a €63 price target and Dutch global information services company Wolters Kluwer was upgraded from 'underperform' to 'outperform' and the price target was raised to €40 from €34.