DISCA

Discovery Inc

TMT


Presented:04/06/2020
Price:$19.65
Cap:$10.24B
Current Price:$7.60
Cap:$18.48B

Presented

Date04/06/2020
Price$19.65
Market Cap$10.24B
Ent Value$40.65B
P/E Ratio6.88x
Book Value$18.66
Div Yield0%
Shares O/S520.92M
Ave Daily Vol5,570,885
Short IntN/A

Current

Price$7.60
Market Cap$18.48B
Discovery, Inc. is a media company, which engages in the provision of content across distribution platforms and digital distribution arrangements. It operates through the following segments: U.S. Networks, International Networks, Education and Other, and Corporate and Inter-segment Eliminations. The U.S. Networks segment owns and operates national television networks such as Discovery Channel, Animal Planet, and Investigation Discovery and Science. The International Networks segment consists of international television networks and websites. The Education and Other segment offers curriculum-based product and service offerings. The Corporate and Inter-segment Eliminations segment represents unallocated corporate amounts. The company was founded by John S. Hendricks in September 1982 and is headquartered in Silver Spring, MD.

Publicly traded companies mentioned herein: AMC Networks Inc (AMCX), AT&T Inc (T), Comcast Corp (CMCSA), Discovery Inc (DISCA), Netflix Inc (NFLX), ViacomCBS Inc (VIAC)

Highlights

The presenter is short shares of Discovery Inc (DISCA), which he thinks of as a bet against pay TV. In his view, the COVID-19 pandemic will accelerate the secular decline in pay TV, in addition to pressuring the advertising market over the next 12 – 18 months. Since DISCA has higher EBITDA margins and less resilient content than its TV programming peers, the presenter thinks DISCA is the best short candidate in the sector. The stock currently trades at ~$20 per share, implying an unlevered FCF multiple in the mid-teen range on his 2021 estimate of $2B. However, if downward revisions to Street numbers occur as he expects, the unlevered FCF multiple should compress to the HSD range, yielding his ~$10 target. 

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Idea Discussion

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