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Seven West Media withdraws guidance as Olympics look set to be postponed

The Seven West Media Ltd (ASX: SWM) share price will be on watch today after the media conglomerate withdrew its FY 2020 earnings guidance.

The Seven West Media share price has been smashed in recent weeks, falling from $0.185 on 20 February to close yesterday at $0.066, a massive loss of 64%.

What has triggered the withdrawal of earnings guidance?

Seven West Media commented that the decision has been triggered by the growing global uncertainty of the coronavirus outbreak as well as a significant fall in its advertising business which is partially linked to the suspension, and in some cases postponement, of major events on its networks.

One of the biggest hits to Seven West Media has been Sunday’s announcement of the suspension of the AFL until the end of May due to the growing coronavirus pandemic here in Australia.

Another big hit that has come in the last 24 hours has been the announcement that the Tokyo Olympics may not be going ahead in 2020.

Seven West Media has exclusive free-to-air (FTA) broadcasting rights to both the AFL and the Tokyo Olympics.

The media company noted that while the official position of the International Olympic Committee is that Tokyo 2020 is still scheduled to proceed, it does acknowledge that the Committee is looking to postpone the event. Already, some national bodies appear more certain that a change in date will be required. A more definite decision appears likely very soon.

Seven West Media noted that any postponements are likely to result in rights payments by the media company being pushed back in line with the revised scheduling. In addition, it noted that cancellation costs may also be incurred from suppliers if postponements are necessary.

The media company added that it is facing challenges with local television productions due to the harsh travel restrictions that have been put in place.

The two other major ASX media shares, Nine Entertainment Co Holdings Ltd (ASX: NEC) and News Corp (ASX: NWS), have also seen share price falls in recent weeks. However, the falls have not been as severe.

On a positive note, I think that Seven West Media’s digital offerings including 7plus will perform strongly over the next few months as the demand for internet media increases due to more people staying at home. I believe that Seven West Media is likely to also get extra viewing on some of its other prime time FTA programs such as news and current affairs.

Response to the new challenges

Seven West Media outlined some of the contingency plans that it has put in place to meet the new challenges. These include business continuity plans that have been activated over the prior two weeks and having the majority its staff now working from home.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nine Entertainment Co. Holdings Limited. 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 Scott Phillips.

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