DISC.A - Embedded Expectations Analysis - 2020 01 07
Discovery, Inc. (DISC.A:USA) currently trades below historical averages relative to UAFRS-based (Uniform) Earnings with a 10.6x Uniform P/E, implying bearish expectations for the firm. Although management's concerns about their direct-to-consumer platform, competitive advantages, and investments suggest the potential for near-term headwinds, long-term upside remains warranted.Specifically, management may be overstating the potential of their direct-to-consumer platform, the strength of their positioning in Poland, and the competitive advantages of their original content and in-house technology architecture operations. Moreover, they may lack confidence in their ability to reduce content costs, sustain basic cable market share growth, and aggregate their entertainment and scripted content. Furthermore, they may be concerned about their M&A and new product investments, their stock buyback program, and the potential of Italian markets.
However, given DISC.A's strong international footprint and unique assets, market expectations are far too bearish, suggesting longer-term upside remains warranted.
Discovery, through its subsidiaries, is a media company that provides content across distribution platforms, including pay-television, free-to-air and broadcast television, and direct-to-consumer subscription products. The company's portfolio of networks includes nonfiction television brands such as Discovery Channel, HGTV, Food Network, TLC, Animal Planet, Science Channel, and MotorTrend . The company's portfolio includes Eurosport, a sports entertainment provider. The company classifies its operations in two segments: U.S. Networks, consisting of domestic television networks and digital content services, and International Networks, consisting of international television networks and digital content services.
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