Seeing television advertising revenue growth accelerating in the wake of a steep pandemic-driven drop, a group of analysts raised their targets for shares of Corus Entertainment Inc. (
) in response to the release of its third-quarter results on Tuesday before the bell.
The Toronto-based company reported a 15-per-cent year-over-year increase in revenue from its key television segment to $380-million, topping the consensus projection of $373-million. Overall, adjusted EBITDA turned positive to $1.3-million from a loss of $1.8-million but falling short of the $2-million estimate on the Street.
BMO Nesbitt Burns analyst Tim Casey said there were few surprises in the earnings release, and he expects momentum to continue as demand from key categories, including travel, entertainment, consumer goods, grows with “a wave of spending” from consumers.
“However, we expect an element of caution from advertisers until the threat of more lockdowns is definitively behind them. Streaming growth remains a positive success story, and we anticipate it will provide offset to linear television subscriber erosion in the near term. We expect some modest margin pressure as normalized programming costs return and CEWS (wage subsidies) expire,” he said.
Keeping a “market perform” rating for Corus shares, Mr. Casey raised his target to $6.75 from $6.50. The average is $8.08.
“Corus is rated Market Perform based on its relative growth profile. Most of its cash flow is generated by television advertising and subscriber fees. Corus also has a growing streaming business which provides some offset to cord-shavers/cutters/nevers. We believe the company faces medium to long-term structural and regulatory headwinds (exacerbated due to the pandemic),” he said.
Others making changes include:
* CIBC World Markets’ Robert Bek to $7.50 from $7.25 with an “outperformer” rating.
“We are encouraged by the company’s progress in streaming and Ad Tech adoption which provide an additional boost, as advertising markets continue a post-COVID recovery,” said Mr. Bek. “We remain focused on the long-tail FCF of the business, and execution through this crisis has not dampened that view.
“In our view, the growth in company’s streaming and digital portfolio further enhances FCF-generation capabilities and argues for a valuation recovery.”
* RBC Dominion Securities’ Drew McReynolds to $8 from $7 with an “outperform” rating.
* TD Securities’ Vince Valentini to $9.50 from $9 with an “action list buy” rating.