Yes, Walt Disney delivered even better numbers than Time Warner(TWX) but there’s a lot to like about the latter. We are fans of capital discipline and also content in the digital media world. TWX delivers that and more.
What’s not to like about the following:
1. TWX forecasting double digit growth in 2014.
2. It’s raising its dividend by 10%.
3. It has announced share buy backs of $5 billion.
4. It’s ditching non-core assets like cable, AOL, real estate(its HQ) and Time magazine.
5. Buying back shares trading at 14x earnings looks like an earnings yield of circa 7% versus US Treasuries yielding 2.7%.
6. Broken-out HBO results reveal a gem delivering 37% returns($1.8 billion) on $4.9 billion of revenues. High quality content already reaching 115m subscribers can grow further. Put that in the context of Netflix with $4.3 billion of sales and just $228m of operating returns.
Netflix is valued at $24 billion which is 40% of TWX’s $57 billion market cap. However, HBO is just 17% of TWX’s revenues.
The share price has underperformed the S&P over the past 6 months but could possibly defy “Gravity” over the coming months…..
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