New York – Influential Merrill Lynch media analyst Jessica Reif Cohen painted a somewhat gloomy picture for the overall economy at an industry conference today, but added that the downturn could present a big opportunity for cable companies.
At the OnScreen Media Summit here Tuesday, sponsored by Multichannel News and Broadcasting & Cable magazines, Reif Cohen said that Merrill’s own economists are bearish on the state of the economy, predicting that the recently-called recession could be “one of the longest and deepest in our lifetime.” And while those same economists are estimating that the country should brace itself for at least another four quarters of negative growth in the Gross Domestic Product, cable investors should find some solace in the fact that there holdings have already taken a big hit.
Reif Cohen pointed to the 28% decline in the cable sector in 2007.
“Entertainment and diversified media and cable stocks tend to go down a year before a recession,” Reif Cohen said. “The market was telling us a year ago what we now know.”
The good news, Reif Cohen added, is that cable stocks historically hit bottom faster than the overall market and in turn recover sooner. While stopping short of saying cable stocks are recession-proof – she said they were more recession resistant – she predicted the sector would outperform the rest of the market, turning in mid-single digit revenue, cash flow and free cash flow growth.