7Plus AFL Streaming Will Captivate Digital Audiences

Key Takeaways

• Explosive digital audience growth and advanced advertising technology position Seven West Media to capture significant uplifts in digital revenue and advertising yields.
  
• Structural margin improvements, cost efficiencies, and diversified content give the company robust earnings potential and resilience through advertising market volatility.
  
• Structural decline in TV advertising, intense digital competition, high fixed costs, and regulatory risks threaten revenue growth, profit margins, and Seven West Media's long-term financial stability.

Catalysts

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

• Analyst consensus expects strong revenue growth from streaming major sports on 7plus, but this likely understates the potential for explosive digital audience gains as 7plus AFL ramps up, unlocking unprecedented advertiser demand and materially boosting both revenue and digital net margins beyond current forecasts.
  
• While analysts broadly see cost control as margin-accretive, the company's visibility on flat or even declining cost bases into FY26, combined with further automation and industry collaboration, could drive earnings growth that materially exceeds expectations and structurally resets long-term margin guidance higher.
  
• Rising adoption of addressable and programmatic advertising, underpinned by the Phoenix trading system and a deep first-party audience database, positions Seven West Media to leverage precision targeting at scale, capturing a disproportionate share of digital ad budget migration and driving sustained uplift in total advertising yields and revenue.
  
• Seven's demonstrated ability to rapidly convert new digital sports viewers to habitual users of platform content (as evidenced by cricket audience cross-pollination) implies a steep acceleration in user growth, increasing lifetime value and strengthening the digital revenue base well beyond analyst consensus.
  
• Continuous growth in multi-platform content consumption and the company's uniquely diversified content library give Seven West Media greater resilience and outsized long-term pricing power, supporting stable top-line growth and enhanced earnings even in volatile advertising cycles.

Seven West Media Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Seven West Media compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Seven West Media's revenue will decrease by 0.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 0.6% today to 5.1% in 3 years time.
• The bullish analysts expect earnings to reach A$68.7 million (and earnings per share of A$0.04) by about August 2028, up from A$8.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 8.6x on those 2028 earnings, down from 26.2x today. This future PE is lower than the current PE for the AU Media industry at 27.0x.
• 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 9.34%, as per the Simply Wall St company report.

Seven West Media Future Earnings Per Share Growth

Risks

• The ongoing structural decline in free-to-air television advertising, combined with a 6% decrease in Seven West Media's total TV advertising revenue for the half, highlights the risk that the company's core revenue base is eroding faster than digital gains can compensate, threatening long-term top-line revenue growth.
  
• The shift of consumer attention toward global digital and streaming platforms, and the dominance of tech giants in digital advertising, is intensifying competition, making it harder for Seven West Media to capture a sizable share of new digital revenue and placing downward pressure on both revenue and digital margins.
  
• The company continues to face high operational leverage and significant fixed costs, including rising content acquisition expenses for premium sports such as the new AFL contract with a 14% to 15% uplift, which may weigh on EBITDA and increase earnings volatility, especially if advertising markets soften.
  
• The company's pace of digital transformation, while showing audience growth for 7plus, still lags behind global leaders, and the significant cost and execution risks in maintaining and scaling digital platforms threaten future digital revenue and margin growth if not effectively managed.
  
• Regulatory risks, such as potential legislative changes to media ownership or possible bans on gambling advertising, could negatively impact advertising revenue streams, while ongoing pressures on cash flow and leverage (with net debt at $260 million and leverage of 1.7 times) restricts capital management flexibility and raises concerns for long-term profitability.

Valuation

• The assumed bullish price target for Seven West Media is A$0.28, which represents two standard deviations above the consensus price target of A$0.19. This valuation is based on what can be assumed as the expectations of Seven West Media's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• 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 bullish analysts, you'd need to believe that by 2028, revenues will be A$1.3 billion, earnings will come to A$68.7 million, and it would be trading on a PE ratio of 8.6x, assuming you use a discount rate of 9.3%.
• Given the current share price of A$0.14, the bullish analyst price target of A$0.28 is 48.7% 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.