Steve Birenberg's Instablog Steve Birenberg is founder and President of Northlake Capital Management, LLC. Northlake specializes in managing portfolios for high net worth individuals using a unique strategy combining monthly ETF rotation based on major market themes supplemented by carefully selected media and telecom stocks. Steve has been managing money since 1982 and following media and telecom since 1990. For the past five years, Steve has been a contributor to RealMoney.com, the professional service of theStreet.com, where he provides commentary on media and telecom stocks. Steve is author of "Dow of Steve" for subscribers of SNL Kagan. Dow of Steve provides commentary on media and communications news from a Wall Street perspective. Steve earned his CFA in 1986 and taught at the Study Seminar for Financial Analyst from 1986 through 1992. Steve grew up in Rochester, NY and graduated from Miami of Ohio in 1982 with a Bachelor of Science in Business Administration. Steve Birenberg http://seekingalpha.com/author/steve-birenberg/instablog Advertising Forecast Cut Behind the Curve http://seekingalpha.com/instablog/372019-steve-birenberg/756-advertising-forecast-cut-behind-the-curve?source=feed 756 I have been following advertising forecasts closely for many years.  I have long thought that Zenith Optimedia provided some of the best forecasts and had the most insights into big picture trends.  However, Zenith has been way behind the curve on this downturn.  As a result, I find little value in their latest forecast cut which was outlined in Tuesday's Wall Street Journal.

Zenith now sees US ad spending at -8.7% vs. a prior forecast of -6.2%.  The new global forecast is -6.9% vs. +0.2%.  The prior forecasts were made at the UBS Media Conference in December 2008.

My thought reading this Journal article was "Zenith, tell me something I don't already know." I think that the lowered forecast contributed to lagging performance in ad-supported media stocks on Tuesday.  If that is correct it is an overreaction and media stocks could rebound if the market turns up soon.

Beyond the daily movements, I think the recent big rally in media stocks assumes a stabilizing ad envrionment with improvement late this year.  I think that might be a bit optimisitic and would be careful putting new money in the group at current prices.  In fact,. I trimmed my position in Discovery Communications (DISCA) last week even though  DISCA has among the strngest advertising growth profiles for 2009.

]]> Tue, 14 Apr 2009 14:10:31 -0400 I have been following advertising forecasts closely for many years.  I have long thought that Zenith Optimedia provided some of the best forecasts and had the most insights into big picture trends.  However, Zenith has been way behind the curve on this downturn.  As a result, I find little value in their latest forecast cut which was outlined in Tuesday's Wall Street Journal.

Zenith now sees US ad spending at -8.7% vs. a prior forecast of -6.2%.  The new global forecast is -6.9% vs. +0.2%.  The prior forecasts were made at the UBS Media Conference in December 2008.

My thought reading this Journal article was "Zenith, tell me something I don't already know." I think that the lowered forecast contributed to lagging performance in ad-supported media stocks on Tuesday.  If that is correct it is an overreaction and media stocks could rebound if the market turns up soon.

Beyond the daily movements, I think the recent big rally in media stocks assumes a stabilizing ad envrionment with improvement late this year.  I think that might be a bit optimisitic and would be careful putting new money in the group at current prices.  In fact,. I trimmed my position in Discovery Communications (DISCA) last week even though  DISCA has among the strngest advertising growth profiles for 2009.

]]> disca media advertising Mobile Data Explosion http://seekingalpha.com/instablog/372019-steve-birenberg/733-mobile-data-explosion?source=feed 733  

SNL Kagan (http://www2.snl.com/media_comm/) has an article out today discussing the potential upgrade to 4G wireless networks.  The article quotes a recent forecast (http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-520862.html) from Cisco Systems (CSCO) with some astonishing statistics:

• Global mobile traffic will exceed two exabytes/month by 2013 (An exabyte is equal to: 1 billion gigabytes; 1,000 petabytes; 250 million DVDs);
• Global mobile traffic will increase 66-fold in five years;
• Nearly 64% of the world's mobile traffic will be video by 2013;
• Mobile video will grow at a CAGR of 150% between 2008 and 2013;
• Mobile broadband handsets with higher than 3G speeds and laptop air or data cards will constitute more than 80% of global mobile traffic by 2013;
• Latin America will have the strongest mobile growth at a 166% CAGR, followed by the Asia Pacific region at 146%; and
•Asia Pacific will account for one-third of all mobile data traffic by 2013.

Despite competion and slowing wireless subscriber growth I think AT&T (T) and Verizon (VZ) are winners as the upgrade path will consume capital gradually and data ARPU will offset voice pressures.  If cable companies can charge for ad-ons like digital cable, HD, and DVRs, telcos should be able to charge for incremental data consumption. 

Obviously, the trend toward data is great for smartphone providers.  Apple (AAPL) and Research in Motion (RIMM) remain in the driver's seat as a rising tide of penetration lifts all boats.

CSCO, T, and VZ are held in Northlake client accounts including my personal accounts.

 

]]> Tue, 14 Apr 2009 10:12:58 -0400  

SNL Kagan (http://www2.snl.com/media_comm/) has an article out today discussing the potential upgrade to 4G wireless networks.  The article quotes a recent forecast (http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-520862.html) from Cisco Systems (CSCO) with some astonishing statistics:

• Global mobile traffic will exceed two exabytes/month by 2013 (An exabyte is equal to: 1 billion gigabytes; 1,000 petabytes; 250 million DVDs);
• Global mobile traffic will increase 66-fold in five years;
• Nearly 64% of the world's mobile traffic will be video by 2013;
• Mobile video will grow at a CAGR of 150% between 2008 and 2013;
• Mobile broadband handsets with higher than 3G speeds and laptop air or data cards will constitute more than 80% of global mobile traffic by 2013;
• Latin America will have the strongest mobile growth at a 166% CAGR, followed by the Asia Pacific region at 146%; and
•Asia Pacific will account for one-third of all mobile data traffic by 2013.

Despite competion and slowing wireless subscriber growth I think AT&T (T) and Verizon (VZ) are winners as the upgrade path will consume capital gradually and data ARPU will offset voice pressures.  If cable companies can charge for ad-ons like digital cable, HD, and DVRs, telcos should be able to charge for incremental data consumption. 

Obviously, the trend toward data is great for smartphone providers.  Apple (AAPL) and Research in Motion (RIMM) remain in the driver's seat as a rising tide of penetration lifts all boats.

CSCO, T, and VZ are held in Northlake client accounts including my personal accounts.

 

]]> t vz csco aapl bbry telecom smartphones wireless Box Office Boom Continues http://seekingalpha.com/instablog/372019-steve-birenberg/593-box-office-boom-continues?source=feed 593 The weekend box office for the top 12 films was up 61%.  It was the second best April weekend ever, trailing only last weekend.  It was also the best ever Easter weekend.

The top three films all performed well.  Hannah Montana The Movie met high expectations with $34 million and provided a much needed boost for Disney (DIS), which had been in a box office slump.  Fast and Furious held well at #2 given the genre and massive opening weekend.  Monsters vs. Aliens firmed up, falling just 30%, taking full advantage of school vacations on Good Friday.  Dreamworks Animation (DWA) is now looking at a solid North American performance for the film relative to expectations.

For the theater stocks, the news is all good.  Look for more estimate increases and higher stock prices for Regal Entertainment (RGC), Cinemark Holdings (CNK), Carmike Cinemas (CKEC), and cinema advertising leader National Cinemedia (NCMI).

The next two weekends should offer solidly positive comparisons before the summer movie season gets underway the first weekend in May with X-Men Origins: Wolverine which will do well but faces a tough comp from the $98 million opening weekend of Iron Man a year ago.

 

]]> Sun, 12 Apr 2009 15:15:00 -0400 The weekend box office for the top 12 films was up 61%.  It was the second best April weekend ever, trailing only last weekend.  It was also the best ever Easter weekend.

The top three films all performed well.  Hannah Montana The Movie met high expectations with $34 million and provided a much needed boost for Disney (DIS), which had been in a box office slump.  Fast and Furious held well at #2 given the genre and massive opening weekend.  Monsters vs. Aliens firmed up, falling just 30%, taking full advantage of school vacations on Good Friday.  Dreamworks Animation (DWA) is now looking at a solid North American performance for the film relative to expectations.

For the theater stocks, the news is all good.  Look for more estimate increases and higher stock prices for Regal Entertainment (RGC), Cinemark Holdings (CNK), Carmike Cinemas (CKEC), and cinema advertising leader National Cinemedia (NCMI).

The next two weekends should offer solidly positive comparisons before the summer movie season gets underway the first weekend in May with X-Men Origins: Wolverine which will do well but faces a tough comp from the $98 million opening weekend of Iron Man a year ago.

 

]]> dis dwa rgc cnk ckec ncmi media box office Trouble in Canadian Wireless? http://seekingalpha.com/instablog/372019-steve-birenberg/404-trouble-in-canadian-wireless?source=feed 404 Telus (TU) reported disappointing subscriber metrics for 1Q this morning.  Net adds of 48,000 fell short of estimates of 75,000 to 100,000.  Even worse, ARPU declines accelerated falling to $58.39, down 5.6% vs. a year ago.  Nott surprisingly, the shares are taking a hard hit, down more than 10%.  The news is dragging all Canadian telecom lower including BCE and Rogers Communications (RCI).  The big risk ahead is for RCI's 1Q.  RCI gets over half of revenue and EBITDA from wireless.  RCI is particularly strong in smartphones whereas TU has a low end bias so it is possible that RCI holds up if Canada ends up looking like the U.S. where smartphones remain healthy.  RCI still has a premium multiple despite the shares finally succumbing.  I'd be careful on the long side ahead of earnings.

]]> Thu, 09 Apr 2009 11:00:56 -0400 Telus (TU) reported disappointing subscriber metrics for 1Q this morning.  Net adds of 48,000 fell short of estimates of 75,000 to 100,000.  Even worse, ARPU declines accelerated falling to $58.39, down 5.6% vs. a year ago.  Nott surprisingly, the shares are taking a hard hit, down more than 10%.  The news is dragging all Canadian telecom lower including BCE and Rogers Communications (RCI).  The big risk ahead is for RCI's 1Q.  RCI gets over half of revenue and EBITDA from wireless.  RCI is particularly strong in smartphones whereas TU has a low end bias so it is possible that RCI holds up if Canada ends up looking like the U.S. where smartphones remain healthy.  RCI still has a premium multiple despite the shares finally succumbing.  I'd be careful on the long side ahead of earnings.

]]> tu sjr bce rci Canada telecom wireless Trimming Discovery Communications: Position Management Only http://seekingalpha.com/instablog/372019-steve-birenberg/402-trimming-discovery-communications-position-management-only?source=feed 402 Discovery Communications (DISCA) has been one Northlake's best performing stocks. The stock was purchased in mid-September prior to the market crash at $16.50. Today, I trimmed the position across most client accounts at $17.83. Pretty amazing that any stock, let alone a media stock, is above its pre-crash level. With most all other holdings down sharply since the DISCA purchase, the position size had swelled to north of 4% in many accounts. Obviously, I still like DISCA as I did not sell the entire position. However, I still see the market and advertising environment as fragile so I want to avoid concentrated positions. DISCA has less margin for error due to its well-earned premium multiple of earnings and cash flow. 1Q earnings are due later this month and I do not think there will be a disappointment. The last two quarters were positive surprises. The key metric will be domestic advertising advertising growth. Expectations are for flat growth (that is excellent compared to -5% to -10% for most media companies). Here's hoping that my sale proves wrong so Northlake clients make more money on their remaining DISCA positions.

]]> Thu, 09 Apr 2009 10:41:15 -0400 Discovery Communications (DISCA) has been one Northlake's best performing stocks. The stock was purchased in mid-September prior to the market crash at $16.50. Today, I trimmed the position across most client accounts at $17.83. Pretty amazing that any stock, let alone a media stock, is above its pre-crash level. With most all other holdings down sharply since the DISCA purchase, the position size had swelled to north of 4% in many accounts. Obviously, I still like DISCA as I did not sell the entire position. However, I still see the market and advertising environment as fragile so I want to avoid concentrated positions. DISCA has less margin for error due to its well-earned premium multiple of earnings and cash flow. 1Q earnings are due later this month and I do not think there will be a disappointment. The last two quarters were positive surprises. The key metric will be domestic advertising advertising growth. Expectations are for flat growth (that is excellent compared to -5% to -10% for most media companies). Here's hoping that my sale proves wrong so Northlake clients make more money on their remaining DISCA positions.

]]> disca media cable networks Apple iPhone Rumors Heating Up http://seekingalpha.com/instablog/372019-steve-birenberg/392-apple-iphone-rumors-heating-up?source=feed 392 Pretty much everyone is now expecting a June introduction of a new iPhone model.  Most people expect an upgrade to the 3G but a few hold out for a second form factor that would have a lower price and allow cheaper data plans.  Rumors are rampant about upgraded prodcution schedules in the Far East.  Most of these articles indicate that the production increases are dedicated to building inventory for the new product.  That is most surley the case but I have been wondering lately about demand trends for the current version.  Anecdotally, I see iPhones everywhere.  I have to admit I look for them and I own one myself.  I am also long Apple.  I also live in the north suburbs of Chicago where Macs are hugely popular and every kid has an iPod.  Apple reports 2Q09 shortly.  As usual, gudiance is what will drive the stock.  But the quarter itself hinges on demand for iPhones and Macs.  No doubt now that iPods are saturated and will suffer a significant sales decline (possibly next quarter due to new shuffle pipeline fill but ASP will be down).  Many analysts have been expecting a weak quarter for iPhones and Macs.  Could it be that iPhone 3G demand is strong and some of that production is to meet current demand? RIMM certainly indicates that smartphone demand is good.  I believe smartphones are a rising tide lifts all boats story for 2009.  Could Apple be in for beat and rasie?  Ok, that is asking too much but how about a beat and guidance that matches analyst estimates?

]]> Thu, 09 Apr 2009 09:10:54 -0400 Pretty much everyone is now expecting a June introduction of a new iPhone model.  Most people expect an upgrade to the 3G but a few hold out for a second form factor that would have a lower price and allow cheaper data plans.  Rumors are rampant about upgraded prodcution schedules in the Far East.  Most of these articles indicate that the production increases are dedicated to building inventory for the new product.  That is most surley the case but I have been wondering lately about demand trends for the current version.  Anecdotally, I see iPhones everywhere.  I have to admit I look for them and I own one myself.  I am also long Apple.  I also live in the north suburbs of Chicago where Macs are hugely popular and every kid has an iPod.  Apple reports 2Q09 shortly.  As usual, gudiance is what will drive the stock.  But the quarter itself hinges on demand for iPhones and Macs.  No doubt now that iPods are saturated and will suffer a significant sales decline (possibly next quarter due to new shuffle pipeline fill but ASP will be down).  Many analysts have been expecting a weak quarter for iPhones and Macs.  Could it be that iPhone 3G demand is strong and some of that production is to meet current demand? RIMM certainly indicates that smartphone demand is good.  I believe smartphones are a rising tide lifts all boats story for 2009.  Could Apple be in for beat and rasie?  Ok, that is asking too much but how about a beat and guidance that matches analyst estimates?

]]> aapl bbry t media telecom smartphones