We downgrade our recommendation on
Liberty Media Corp.
) to Underperform primarily based on its current valuation.
Liberty Media currently has a Zacks Rank #5 (Strong
Why the Downgrade?
The stock price of Liberty Media has soared nearly 26% in the
last year. At present, Liberty Media is trading at extremely high
multiples compared to both the S&P 500 and the industry
average with respect to several valuation metrics. We believe
that the stock is overvalued at this stage and the multiples must
converge toward its peer average.
Nevertheless, the company reported excellent financial results
for the first quarter of 2013, easily beating the Zacks Consensus
Estimate. Liberty Mediais gradually restructuring its business
model, targeting to control the subscription-based companies.
Currently, Liberty Media controls a 50.2% stake of
SIRIUS XM Radio Inc.
), a 27.3% stake of
Charter Communications Inc.
) and a 27% stake of
Live Nation Entertainment Inc.
Moreover, management is pursuing a systematic share buy-back
program to boost shareholders' wealth. The spin-off of the Starz
segment as a separate entity has helped the company to improve
its financial position.
On the other hand, Liberty Media's businesses are susceptible
to rapid technological changes. Large cable TV operators are
increasingly deploying digital TV networks, which are rapidly
gaining huge market traction. This may adversely impact the
channel positioning of Liberty Media's networks.
Increasing deployment of personal video recorders,
video-on-demand technology and IPTV network are systematically
changing the distribution and viewing habits of the common
people. Further, the multi-channel video market in the U.S. is
LIBERTY MEDIA-A (LMCA): Free Stock Analysis
LIVE NATION ENT (LYV): Free Stock Analysis
SIRIUS XM RADIO (SIRI): Free Stock Analysis
To read this article on Zacks.com click here.