Analysts reduce price targets for Zee post Sony merger deal termination
Factors like weak competitive positioning, corporate governance issues, and precarious financial health have made analysts bearish on Zee Entertainment Enterprises as the proposed $10 billion merger with Sony has been called off
- Jan 23, 2024,
- Updated Jan 23, 2024 9:15 AM IST
Shares of Zee Entertainment Enterprises will be in the limelight on Tuesday – the first trading session after the announcement that the proposed Zee-Sony merger deal has been terminated.
Most of the analyst community views the latest development as a negative for the Indian media & entertainment company and has slashed its recommendations and also the price targets.
“Merger with Sony was the key valuation driver to move up in the past two years. But given the termination, we downgrade (Zee) to Sell with March 2025E TP pared to INR 170 from INR 340,” stated a report by Elara Capital.
“But if the Disney contract is honoured, TP may move to INR 130, citing losses in the sports segment. We value the broadcasting business at 10x one-year forward P/E and OTT at 3.0x one-year forward EV/sales. Possibility of any other strategic/financial partner buying majority stake in Zee could provide respite to valuation multiples,” added the report.
Elara Capital has downgraded the stock to sell while lowering its target price from the earlier ₹170 from the earlier ₹340.
Similarly, Emkay Global has also downgraded the stock from buy to sell while reducing the target price to ₹175. “… we downgrade the stock to Sell (from Buy) due to weak competitive positioning and escalated corporate governance issues,” stated the report by Emkay.
The proposed Zee-Sony merger deal worth $10 billion has been terminated over two years after it was announced. Envisaged as the second largest after Star and Disney India, it was to be a combined entity with 75 channels with a strong presence in entertainment, sports and regional markets apart from two OTT platforms.
Incidentally, the deal allegedly fell apart due to a stalemate over whether Zee Entertainment Enterprises’ Chief Executive Officer Punit Goenka would head the merged entity amid an investigation by capital markets regulator Securities and Exchange Board of India (Sebi).
“Zee is in a precarious financial health and will be facing growing competition, as Reliance Industries and Walt Disney Co. near their own merger,” says Amit Goel, Co-Founder and Chief Global Strategist at Pace 360.
Shares of Zee touched a 52-week low of Rs 172.25 in June last year but since then have gained ground and are currently trading around Rs 232. Over the last one month, however, the shares have lost ground after touching their 52-week high of Rs 299.50.
Also read: ZEE-Sony merger: 6 likely reasons for the deal falling through
Also read: ZEE shares at Rs 130? Stock sees 'Sell' recommendations, PE derating on Sony merger termination
Shares of Zee Entertainment Enterprises will be in the limelight on Tuesday – the first trading session after the announcement that the proposed Zee-Sony merger deal has been terminated.
Most of the analyst community views the latest development as a negative for the Indian media & entertainment company and has slashed its recommendations and also the price targets.
“Merger with Sony was the key valuation driver to move up in the past two years. But given the termination, we downgrade (Zee) to Sell with March 2025E TP pared to INR 170 from INR 340,” stated a report by Elara Capital.
“But if the Disney contract is honoured, TP may move to INR 130, citing losses in the sports segment. We value the broadcasting business at 10x one-year forward P/E and OTT at 3.0x one-year forward EV/sales. Possibility of any other strategic/financial partner buying majority stake in Zee could provide respite to valuation multiples,” added the report.
Elara Capital has downgraded the stock to sell while lowering its target price from the earlier ₹170 from the earlier ₹340.
Similarly, Emkay Global has also downgraded the stock from buy to sell while reducing the target price to ₹175. “… we downgrade the stock to Sell (from Buy) due to weak competitive positioning and escalated corporate governance issues,” stated the report by Emkay.
The proposed Zee-Sony merger deal worth $10 billion has been terminated over two years after it was announced. Envisaged as the second largest after Star and Disney India, it was to be a combined entity with 75 channels with a strong presence in entertainment, sports and regional markets apart from two OTT platforms.
Incidentally, the deal allegedly fell apart due to a stalemate over whether Zee Entertainment Enterprises’ Chief Executive Officer Punit Goenka would head the merged entity amid an investigation by capital markets regulator Securities and Exchange Board of India (Sebi).
“Zee is in a precarious financial health and will be facing growing competition, as Reliance Industries and Walt Disney Co. near their own merger,” says Amit Goel, Co-Founder and Chief Global Strategist at Pace 360.
Shares of Zee touched a 52-week low of Rs 172.25 in June last year but since then have gained ground and are currently trading around Rs 232. Over the last one month, however, the shares have lost ground after touching their 52-week high of Rs 299.50.
Also read: ZEE-Sony merger: 6 likely reasons for the deal falling through
Also read: ZEE shares at Rs 130? Stock sees 'Sell' recommendations, PE derating on Sony merger termination