RE:CIBC comments on result great post - average target looks like it will be mid $3 range for a bit.
yield is high, but even bank yields are peak in this current market.
incomedreamer11 wrote: CORUS ENTERTAINMENT INC.
Weak TV Advertising Markets: Downgrading To Neutral
Our Conclusion
Corus provided a negative operational update on Friday morning, noting that a complex macroeconomic environment and lingering effects of the pandemic are combining to put greater-than-expected pressure on television advertising revenue. Corus expects “meaningful year-over-year softness” in its FQ4 television advertising revenues as demand has lagged. With softness in advertising markets likely to persist for multiple quarters as the macroeconomic outlook remains uncertain, we are now forecasting the business to see a modest revenue decline in F2023. Given the weaker-thanexpected advertising markets and Corus’ channels business facing additional competitive headwinds as larger streaming players release cheaper adsupported tiers, we are downgrading Corus to Neutral and reducing our price target from $6.50 to $3.75.
While we acknowledge that Corus appears inexpensive at 4.8x our updated 2023E EBITDA and a 34% FCF yield on 2023E, we see minimal catalysts to the upside in the coming quarters that will shift sentiment on the name and provide meaningful share price gains.
Key Points Advertising Budgets Under Pressure: We believe that macroeconomic uncertainty and fears of an impending recession have begun to put pressure on advertiser budgets. During periods of economic weakness, advertising spending is typically one of the initial areas where spending is curtailed, and it appears those pullbacks have already started to take place. We have concerns that advertising budgets could remain depressed well into Corus’ F2023, as the macro backdrop of rate hikes and central bank tightening weighs on end-consumer demand and advertisers’ willingness to spend.
Will TV Advertising Recover To Pre-pandemic Levels?: After hitting a high watermark of $967MM in F2019, TV advertising revenue has remained below pre-pandemic levels. While Corus has looked to improve advertising efficiency through self-serve ad buying and common audience segments, it is an open question as to whether ad revenue can return to pre-pandemic levels. Corus is also facing headwinds in the form of ad-supported tiers from large streaming providers such as Netflix, Disney and Discovery+. These lower-price offerings may lure TV subscribers and advertising dollars away from Corus’ linear channels. While we expect TV Advertising to return to modest growth in F2024 as macro headwinds subside, the ultimate ceiling of the TV business does appear to have been lowered.
Valuation Does Remain Compelling: Corus is currently trading at 4.8x our updated 2023E EBITDA, a 34% 2023E FCF yield and a 7.6% dividend yield. The shares do screen as inexpensive from a valuation perspective, and that alone may be a reason to own Corus shares. While an attractive dividend yield and active NCIB do provide return opportunities for Corus shareholders, we do not see Corus shares meaningfully exceeding the average 5x EV/EBITDA multiple where shares have traded over the last three years.