Stock of the day: Nine Entertainment
Despite digital shifts, Nine Entertainment faces ongoing challenges in a tough media landscape and continues to cut costs
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This video was created on 28 August for IG audiences by ausbiz.
Stock of the day: Nine Entertainment (ASX:NEC)
Ongoing challenges in a shifting media landscape
Nine Entertainment continues to grapple with a challenging media environment, cutting $47 million in recurring costs last financial year and planning an additional $50 million reduction in FY25. The company is struggling, particularly in its broadcasting division, due to a highly competitive advertising market and a broader structural decline in traditional media.
Cost-cutting has been a long-standing theme for Nine Entertainment, highlighting the broader difficulties in the media sector. Both broadcasting and newspaper segments are under pressure as advertising revenue becomes increasingly scarce. Despite some positive signs in subscription services, the overall outlook remains tough as Nine Entertainment battles a structural decline in its core business.
Olympics and digital shift offer cautious optimism
The upcoming Olympics have increased costs for Nine Entertainment, which were recorded in FY24 but will contribute to revenue in FY25. The company is also shifting consumers towards digital platforms to offset the decline in traditional media. While this digital transition offers potential, it comes with challenges.
Debt and valuation concerns
Nine Entertainment trades at a low valuation, with earnings multiples below ten times. However, significant concerns remain regarding the company's debt, which has grown due to share buybacks and dividend payments. Management remains confident in handling this debt, but the cyclical nature of the media business adds risk.
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