Nine Entertainment Co Holdings Ltd (ASX: NEC) has been riding high for the past 3 months, with its share price gaining more than 30%. This is despite the company reporting a 17% decline in its full year FY20 results in August.
Let’s look at what’s driving this rise in the Nine share price.
First, what does Nine Entertainment own?
Nine is a media conglomerate which owns the Channel 9 television channels and assets, as well as the 9Now online streaming service. The company also owns the old Fairfax Media Group, publisher of several newspapers such as The Sydney Morning Herald, The Age and The Australian Financial Review. Additionally, the company owns the Stan streaming service and a 60% chunk of Domain Holdings Australia Ltd (ASX: DHG).
What’s driving the Nine share price up?
Shrugging off a disappointing full year result back in August, Nine Entertainment has continued on its upward trajectory momentum.
The increase in Nine’s share price is mainly driven by an improving landscape in advertiser and consumer sentiment. For instance, the Westpac-Melbourne Institute Index of Consumer Sentiment , was 105.0 in October, up from 93.8 in September, and 86.4 six months earlier. Clearly consumer confidence and spending is starting to rise again. The survey also noted that the lift of COVID-19 restrictions has increased confidence for investors.
The company has also benefited from the cost restructuring program it conducted in response to COVID-19. In its financial year reporting, it advised it would step up its three-year cost-out initiative from $150 million to $230 million by 2024.
According to its financial report, Nine generates 90% of its earnings from its Nine Network channel – one of only three television channels licensed to broadcast free-to-air in Australia. The total market for free-to-air advertising is $2.7 billion, of which Nine commands the number one position at 39%.
This market is gradually dwindling as advertisers move to digital platforms. However, management said Nine’s investments in digital platforms such as 9Now, Stan, and Domain had gradually increased its market share in the fragmented digital market. That’s where it expects to see future growth.
Nine’s share price performance in 2020
As noted earlier, Nine’s share price has been on the rise for the past three months, gaining more than 30%. Today, The Nine share price is $2.36, up 2.36%, and commands a market cap of $3.8 billion.
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