At a time when Wall Street investors appear to be turning their backs on many of its biggest customers, a leading analyst has boosted Nielsen’s stock to an “outperform” rating largely because it will benefit from the same forces that seem to be challenging its top clients.
“In the vein of ‘when your customers aren’t doing well, you’re not doing well,’ we can see some level of negative read-through, but it seems overdone to us,” BMO Capital Markets’ Dan Salmon writes in an equities research report sent to investors this morning.
In the report, Salmon makes the opposite case: That even though big TV-centric companies are being battered on Wall Street and Madison Avenue and might otherwise look to “contain costs in legacy businesses,” Nielsen likely will be immune from such cuts.
“We’ve also never known the media companies to not be strict negotiators with their vendors like Nielsen, which of course, remains an essential one as the currency for the majority of their advertising dollars,” Salmon explains, adding: “More importantly, Nielsen will be launching a product -- Digital Content Ratings -- that will help shed light on the shift of TV viewing to internet platforms, the root cause of the anxiety around media companies’ subscriber base and affiliate fee growth.”
From an investor’s point of view, Salmon says the rollout of DAR, and other aspects of Nielsen’s “total audience” strategy (including the imminent arrival of its Digital Content Ratings), make Nielsen not just immune from the market forces hobbling big media companies, but actually more valuable.
In fact, Salmon reminds investors that Nielsen “is, after all, an information services business, not a media company” -- and that should benefit shareholders “if uncertainty continues.” In other words, the worse things get for Nielsen’s customers, the better the market position is for Nielsen.
In terms of Nielsen’s competitive position in the annuity information services marketplace supplying big media companies and agencies, Salmon says he has also recently upgraded his view of Nielsen as the dominant solution vis a vis companies like comScore, Rentrak, Kantar and others, noting:“More qualitatively, there seems to be a broadly held view that Nielsen is better addressing the needs of a changing media landscape. This was not the case as recently as 6-12 months ago, but as more customers begin to use the new products, the tone is changing.”