This could be a good year for media.
The industry has been struggling of late as customers increasingly looked to online streaming services like Netflix and Amazon and advertisers followed the demand.
This is set to change, however, as improved prospects and relatively low valuations could see media stocks rise by 15 to 25% by the end of 2017, according to a note by Morgan Stanley Research on Thursday.
“Looking forward, we see TV distribution revenue growth accelerating and increasing confidence in earnings growth moving us from bearish to bullish,” according to the note led by Morgan Stanley’s Ben Swinburne.
The team upgraded its media industry to “attractive,” citing lower distribution fees due to consolidation in the industry and improved prospects for new streaming offers in 2017 that could convert basic cable customers to higher-value packages.
Traditional TV saw a huge decline in advertising post-recession and lost share to emerging digital platforms, according to Swinburne. Since then, however, big brands in consumer packaged goods, food and beverage returned to TV as they looked for a higher-end brand experience and a better return on investment. “We see a robust advertising year in 2017 and overall,” said Swinburne.
Swinburne also looks to President Trump’s promised corporate tax reforms as a major benefit to the sector heading into the year.