Bernstein says that price to earnings ratios are not the correct way to value media stocks, since they are highly leveraged, are not growing and face uncertain futures. Instead, the firm suggests that investors use EV/EBITDA, which, unlike P/E, "takes into account cash flows/earnings to the entire enterprise -both vequity holders and creditors," according to the firm. The firm says that Viacom (VIAB) and Discovery (DISCA) look cheap on a P/E basis, but are overvalued when considering Ev/EBITDA. It kept an Underperform rating on Viacom and downgraded Discovery to Underperform from Market Perform while cutting its price target on the name to $23 from $29. Bernstein believes that Scripps Networks (SNI) and CBS (CBS) are "on the bubble," as it notes that the companies' share prices are about in-line with the firm''s price targets. Bernstein says that it would rate the stocks Underperform if it was just considering 2H16, but it expects both companies to be "winners" over the longer term ,and keeps a Market Perform rating on both stocks based on a 12 month time horizon. Bernstein keeps an Outperform rating on 21st Century Fox (FOXA), saying that its EV/EBITDA valuation is more attractive than it P/E ratio. :theflyonthewall.com
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