While the oppress is still on the government to prove its case against the $108 billion broached deal between AT&T Inc. (T) and Time Warner Inc. (TWX), one team of analysts on the Street thinks that regardless of the development, the media space will see a period of heightened M&A activity.
Guggenheim’s Michael Morris iterated a buy rating on shares of Time Warner, indicating that any pairing with another median giant such as the Walt Disney Co. (DIS), CBS Corp. (CBS) or 21st Century Fox Inc. (FOXA) hand down benefit the entertainment conglomerate. (See also: AT&T-Time Warner Deal All things considered Dead, Options Trades Show.)
Tech Giants Drive Average Consolidation
Traditional media players have faced intensifying plank and content competition from the FAANG stocks, made up by Facebook Inc. (FB), Amazon.com Inc. (AMZN), Apple Inc. (AAPL), Netflix Inc. (NFLX) and Alphabet Inc. (GOOG). Measured with uncertainty regarding the AT&T deal, the race for content should compel media companies to continue to seek out horizontal M&A in efforts to boost their store share, wrote Morris. As a result, even if AT&T is off the table, a deal should unmoving go through, according to the Guggenheim analyst.
“We believe that media players will be best positioned to serve consumers by offering content both momentarily and within bundled channel offerings. As such, we view some persistence consolidation as beneficial to developing the necessary scale to build these displays without compromising negotiating leverage relative to distribution partners,” jotted Morris.
The analyst also lowered his price target on TWX to $102 from $106, over a 14.3% upside from Monday afternoon. Trading down 0.3% at $89.20, TWX has killed disintegrated about 7.6% year-to-date (YTD) versus the S&P 500’s 16.3% increase exceeding the same period. (See also: Snap Signs $100M Content Distribute With Time Warner.)