Mediaset’s share price is likely to be volatile while uncertainty over the outcome of its legal fight with Vivendi remains a factor, according to analysts at Berenberg, who have placed a ‘hold’ rating on the Italian broadcaster’s stock.
Berenberg said the legal battle will continue to be “a source of significant Mediaset share price volatility”, with Mediaset and Fininvest likely “holding out for more” than Vivendi might be willing to concede.
Any court finding in favour of Mediaset is likely to be subject to appeal, and Mediaset’s share price “prices in nothing in terms of resolution”, said Berenberg.
The falling apart of the planned JV between Telecom Italia and Canal+, which had been expected to acquire up to €460 of Mediaset’s content over a six-year period has added to uncertainty about the shape of any eventual resolution to the long-running feud between Vivendi and Mediaset, Berenberg noted.
The analysts said that Mediaset’s cost-cutting programme is proceeding ahead of schedule, and that the Italian advertising market is expected to grow modestly this year, while the Spanish ad market is likely to be challenging. The latter, having performed better than Italy in the past, is now forecast to slow down, which could have a negative impact on Mediaset España and on Mediaset’s share price.
Berenberg said that Mediaset’s strategy of scaling back its pay TV business and cutting costs would likely result in lower revenues but better long-term profitability. However, 2018 profitability is likely to be hit by writedowns, it said.
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