Target price down to zero Corus Entertainment Inc. (CJR-B-T) shares will be essentially worthless over the coming 12 months, said Canaccord Genuity analyst Aravinda Galappatthige in the wake of the media company’s fiscal fourth quarter results. Citing the results in conjunction with the firm’s high debt load and precarious balance sheet, he lowered his price target to zero cents per share from 10 cents and maintained a “sell’ rating.
Fourth quarter results came in lower than expected, mainly due to weaker ad revenues and also a steeper-than-expected decline in content. Adjusted EBITDA was $42.3 million, down 8.6% year over year vs Canaccord estimates of $41.3 million. Total revenues were down 20.5% year over year.
“Following the light quarter as well as the weaker-than-expected TV ad guide for Q1, we have further lowered our estimates. Our new estimates are based on a 14% decline in TV ads in F2025, improving to -6% by F2026. This is partly to reflect the transition from Food Network and HGTV. We see a sharp EBITDA decline in Q1/25 due to a rebound in programming costs alongside the ad pressure, but expect the decline rates to moderate towards 10% by the end of the year. Based on the new estimates, we see the leverage ratio (net debt/LTM EBITDA) rising to 4.6x by mid-F2025.
The company announced a further amendment to the credit facility with its bank syndicate, which extended it to March 31, 2025. The covenant is set at 5.75x (debt to cashflow) for Dec 31, 2024, and 7.25x up to March 31, 2025. “We continue to believe that a debt restructuring is very likely the ultimate outcome, especially with the senior notes currently trading just below $0.50 on the dollar,” Mr. Galappatthige commented.
The average analyst price target is 11 cents.