On Monday, Scotiabank adjusted its stance on Corus Entertainment (CJR/B:CN) (OTC: OTC:CJREF), downgrading the media company's stock to Sector Underperform from Sector Perform. The bank also revised the price target to C$0.37 from the previous C$0.90. This move comes in response to a recent announcement made by Corus Entertainment regarding its future programming and trademark prospects.
Corus Entertainment disclosed after markets closed on Friday that Warner Bros Discovery (NASDAQ:WBD) will not renew certain programming and trademarks with Corus after the end of 2024.
This decision is expected to significantly impact Corus, as the affected programming and trademarks across five channels contributed approximately C$155 million in revenues and C$49 million in operating income during fiscal 2022, according to the last published data from the Canadian Radio-television and Telecommunications Commission (CRTC).
The company is planning to replace the programming on these channels; however, the loss of trademarks may result in a decline in subscribers. These subscribers might choose alternative broadcasters or streaming services that acquire the rights. Scotiabank's analysis suggests that Corus could potentially lose up to 50% of the subscribers and advertising revenue from these channels.
Despite maintaining the EBITDA multiple at 4x, the bank's projections indicate that Corus's EBITDA could drop to C$306 million by 2025. This forecast has led to the lowered valuation of C$0.37 per share and the subsequent downgrade. The implications of these anticipated changes are expected to materially affect the valuation of Corus Entertainment's stock.
InvestingPro Insights
In light of the recent downgrade by Scotiabank, real-time data from InvestingPro provides additional context on Corus Entertainment's financial health and market sentiment. The company currently has a market capitalization of 70.94M USD, reflecting the market's adjusted valuation of the company. Notably, Corus Entertainment is trading at a low Price / Book multiple of 0.3, which might attract investors looking for potentially undervalued stocks.
InvestingPro Tips suggest that Corus Entertainment's stock price movements have been quite volatile, with a 1 Year Price Total Return of -64.58%, indicating significant downward pressure over the past year. Additionally, the company pays a significant dividend to shareholders, with a current Dividend Yield of 31.37%, which may appeal to income-focused investors. However, it's important to note that the dividend growth has decreased by -37.31% in the last twelve months as of Q2 2024, which could raise concerns about the sustainability of such high yields.
For investors seeking a deeper analysis, InvestingPro offers more tips on Corus Entertainment and its financial outlook. With the coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription – a valuable resource for those who want to stay informed about their investments.
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