Investing

Morgan Stanley Says Beware These Two Streaming Stocks

Chris Lange

Published: July 26, 2022 8:34 am

Last Updated: July 26, 2022 9:45 am

Streaming services made a splash in recent years as more consumers cut the cord from cable and jumped on board with Netflix, Amazon and others. However, considering the current market climate and looming recession, one major Wall Street name thinks that it’s time to back off some of these stocks.

Morgan Stanley has issued a couple calls with a focus on streaming firms. Benjamin Swinburne was the lead analyst on the call for the investment house. One of the calls was fairly positive while the other was predicting even more downside.

Swinburne says in the research note that the pivot to streaming has not reduced the risk to media estimates from a slowing economy. Advertisers and consumers are likely to pull back in a recession at a time when some media these stocks have outperformed the market year-to-date thanks to already low multiples.

He is “incrementally cautious” on the TV/streaming group saying the pivot to streaming “is about to get more difficult.” Swinburne sees rising churn risk from consumers trimming their streaming portfolios in a more difficult economic environment. Additionally, Apple, Amazon and Netflix “appear to be increasingly eager to peel away” major U.S. sports from the pay-TV bundle, concludes Swinburne.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

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Fox Corp. (NASDAQ: FOXA) Morgan Stanley downgraded to an Equal Weight rating from Overweight and cut the price target to $38 from $45, implying upside of 13% from the most recent closing price of $33.68. The stock traded at around $36 on Tuesday, in a 52-week range of $31.33 to $44.95. Shares are down over 4% year to date. It has a dividend yield of 1.4%.

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Paramount Global (NASDAQ: PARA): Swinburne downgraded to an Underweight rating from Equal Weight and cut the price target to $22 from $32, implying downside of 12% from the most recent closing price of $25.00. Paramount stock has a 52-week trading range of $23.68 to $42.45, and it traded near $24 a share on Tuesday. The stock is down 16% year to date. It has a dividend yield of 3.8%.