Premium AFL And Cricket Rights Will Drive Digital Momentum

Key Takeaways

• Expanding digital audiences and premium sports rights drive digital ad growth, audience engagement, and improved earnings through a stronger revenue mix.
  
• Integration of regional TV assets and investments in data platforms enhance market reach, operational leverage, targeted ads, and support margin and cash flow improvement.
  
• Shrinking traditional ad revenue, rising costs, digital competition, and regulatory uncertainty threaten Seven West Media's earnings stability, margins, and ability to diversify revenue streams.

Catalysts

Engages in the free to air television broadcasting and digital streaming in Australia and internationally.

• Continued strong growth in 7plus daily active users and streaming minutes, alongside rising digital advertising adoption, positions Seven West Media to capitalize on the shift of marketing budgets online, supporting digital advertising revenue acceleration and improving overall revenue mix.
  
• The accelerating expansion and monetization of premium digital sports rights (AFL and Cricket) is expected to drive sustained digital audience engagement and high-value advertising bookings, directly supporting earnings and cash flow growth.
  
• The successful integration of the newly acquired Southern Cross regional TV assets expands Seven's total addressable market, enabling greater operational leverage, potential revenue synergies, and larger share gains in both metropolitan and regional markets.
  
• Ongoing investment in data and content platforms (e.g., Seven REDiQ, Streamscape analytics) enhances first-party data capabilities and cross-platform audience measurement, boosting targeted ad offerings, CPMs, and ultimately net margins.
  
• Cost discipline through automation, workflow simplification, and targeted $35 million cost-out initiatives improve net margins and free cash flow, creating further balance sheet strength for future growth investments.

Seven West Media Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Seven West Media's revenue will grow by 1.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.2% today to 4.2% in 3 years time.
• Analysts expect earnings to reach A$59.4 million (and earnings per share of A$0.04) by about August 2028, up from A$16.6 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting A$75.7 million in earnings, and the most bearish expecting A$40.6 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.3x on those 2028 earnings, down from 12.9x today. This future PE is lower than the current PE for the AU Media industry at 25.8x.
• Analysts expect the number of shares outstanding to grow by 1.24% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.99%, as per the Simply Wall St company report.

Seven West Media Future Earnings Per Share Growth

Risks

• Ongoing decline in traditional TV advertising revenue (down 4% for the year), coupled with structural audience fragmentation and growing preference among younger demographics for digital and on-demand content, may lead to persistent weakness in core revenue streams over the long term, threatening total revenue and earnings stability.
  
• Heavy reliance on volatile advertising markets-with only partial short-term offset from BVOD growth-exposes Seven West Media to macroeconomic cycles and could result in sustained earnings volatility and pressure on margin expansion.
  
• Rising costs from new premium sports rights contracts (notably AFL and cricket) and higher operating expenses from recent acquisitions may compress net margins if revenue growth in new digital and regional assets fails to outpace these increases.
  
• Intensifying competition from global digital and technology platforms (such as Google, Meta, and Netflix), which continue to capture higher advertising spend and consumer attention, could undermine Seven West Media's ability to achieve sustained digital revenue growth, impacting future revenue diversification.
  
• Uncertainty over regulatory matters (like the news media bargaining incentives and potential new compliance requirements) introduces risk of increased operational complexity and costs, with potential adverse effects on both net margins and long-term earnings visibility.

Valuation

• The analysts have a consensus price target of A$0.176 for Seven West Media based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$0.3, and the most bearish reporting a price target of just A$0.13.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$1.4 billion, earnings will come to A$59.4 million, and it would be trading on a PE ratio of 6.3x, assuming you use a discount rate of 10.0%.
  
• Given the current share price of A$0.14, the analyst price target of A$0.18 is 20.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.