Why the Sky Network Television Ltd share price is falling in

Sky Network Television Ltd (ASX:SKT) shares plunged 9.5% today.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Watch out below! The Sky Network Television Ltd (ASX: SKT) share price is plunging.

Source: Google Finance
Source: Google Finance

What happened?

Earlier today, New Zealand's leading pay television provider updated the market on its expected operating profit for its current financial year that is due to end 30 June 2017. The company said that it's forecasting earnings before interest, tax, depreciation and amortisation (EBITDA) to be between 5% and 7% below the $296 million it forecast to the market on 13 June 2016.

The lower end of the company's range would imply an EBITDA figure around $275 million. In other words, around 15% below the company's EBITDA in 2016 and 27% below 2015's result of $379 million.

"Based on SKY's trading results to 30 November, forecast revenues are down slightly due to a reduction in subscriber numbers and a change in customer mix," the company's announcement read.

"Sky continues to focus on providing customers with superior content and the decline in forecast EBITDA is also due to increased content costs, including the acquisition of rights to broadcast the 2017 America's Cup, Lions Tour to NZ and PGA golf."

As an aside, Sky Network issued two statements to the market today. The second "amended" version (which corrected a version published 40 minutes earlier) included the following paragraph:

"We also note that SKY updated the market on 20 October 2016 in relation to an error in its depreciation, amortisation and impairment forecast for the year ended 30 June 2017 and that this should be $109.1 million rather than the $101.3 million included in the EM [Explanatory Memorandum]".

Foolish takeaway

Sky Network's business is being challenged by online streaming services (such as Netflix and YouTube) in much the same way as local providers such as Foxtel, which is owned by Telstra Corporation Ltd (ASX: TLS). While the business appears to be well run, I think there are better opportunities for investors on the ASX.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Netflix. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »