ABGSC on the media sector: “Substantial long-term upside across media stocks”

Derek Laliberté is an equity research analyst at ABG Sundal Collier, covering companies in the media and investment company sectors. The media sector continues to witness a number of disruptive changes – from increasing digitalisation, to the development of new technologies and platforms. In an interview, Derek gives his current thoughts on the sector.
 
What trends are driving the media sector?
“The companies I cover in the media sector are benefitting from multiple market drivers. Digitalisation is undoubtedly a key driver, which for example involves consumption moving away from physical books and magazines to audiobooks and e-books/magazines. Meanwhile, the consumption of radio is gradually being replaced by podcast listening and digital ads are continuing to increase in dominance. Other more specific drivers include the convenience and attractive pricing of all-you-can-consume digital subscription models, and product innovations such as Bluetooth earphones. In general, there are many specific and general drivers for each media segment, and there are also many parallels with what has occurred in the music and video sectors.”
 
Most interesting company to follow in the coming months, and what is your top pick?
“There are a lot of exciting things going on in Storytel right now and the stock is in a really interesting place. I therefore look forward to hearing more about, for example, the recent acquisition in the US, the Spotify partnership, and the outlook for 2022. From a long-term perspective, I see substantial upside in all of the stocks that I follow in the media sector. For 2022, I think Acast has the biggest potential.”
 
Challenges for the sector?
“While I am bullish, I certainly see many risks and challenges. To generalise, I would say that competition is the main challenge. This relates not only to existing and new direct competitors, but also to increasing competition for content and competitors along various points in the value chain.”
 
What macro events will you be keeping an eye on?
“Long-term consumption patterns are highly relevant, but I do not pay much attention to specific macro events in my ongoing analysis of these companies. However, I look closely at sector- and factor trends that affect the pricing of the stocks. And this is to a large degree driven by the general macro trend and the interest rate environment, which I will continue to keep a close eye on.”
 
Overall outlook for the stock market in the coming 6 months: positive/negative/neutral – and why?
“Neutral. I continue to consider the outlook generally favourable on the back of strong macro, a supportive technical setup, and a fairly good earnings outlook. However, I think the market could struggle to move higher as I question if investors have fully factored in the monetary policy tightening that I think we are likely to see. And, as always, historically high valuations also make the market more vulnerable to negative surprises.”
 
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