Upcoming Releases From Newen Studios Will Broaden Content Offerings And Reach In The Future

Key Takeaways

• TF1+'s growth in digital advertising and content expansion is set to boost revenue and enhance geographic reach.
  
• Financial stability and strategic transformation efforts may improve earnings stability and appeal to income-focused investors.
  
• The advertising market tension and increased taxes in France may impact profitability, while high investment in expansion strains resources and affects liquidity.

Catalysts

Engages in the broadcasting, studios and entertainment, and digital businesses in France and internationally.

• TF1+ is positioned to become the leading free streaming platform in the French-speaking market, with an aim to double its market share in digital advertising in the medium term. This could significantly boost future revenue growth.
  
• The ongoing expansion and new content partnerships for TF1+, alongside its international rollout, are expected to enhance content offerings and geographic reach, leading to increased advertising revenue and improved monetization.
  
• The production segment, particularly Newen Studios, has activities skewed towards the fourth quarter with upcoming significant releases, implying potential future revenue and earnings boosts as these productions are delivered.
  
• The company's strategy to transform TF1+ into a full funnel digital marketing platform with innovative advertising solutions is expected to enhance net margins by providing higher-value advertising opportunities.
  
• With a strong financial position and a focus on maintaining a stable current operating margin, the company is positioned to enable future earnings stability and potentially increase dividend payouts, appealing to income-focused investors.

TF1 Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming TF1's revenue will grow by 2.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.4% today to 10.1% in 3 years time.
• Analysts expect earnings to reach €255.5 million (and earnings per share of €1.24) by about February 2028, up from €197.6 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €311 million in earnings, and the most bearish expecting €178.2 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.5x on those 2028 earnings, up from 8.3x today. This future PE is lower than the current PE for the GB Media industry at 11.1x.
• Analysts expect the number of shares outstanding to grow by 1.84% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.81%, as per the Simply Wall St company report.

TF1 Future Earnings Per Share Growth

Risks

• The advertising market is showing signs of tension for late 2024, potentially due to political and tax situations in France, which could negatively impact future advertising revenues.
  
• A decrease in operating margin from activities suggests potential pressure on profitability, impacting net margins.
  
• Working capital changes and high levels of payments collected in 2023 related to events like the FIFA World Cup may not be replicated, affecting cash flow stability and liquidity.
  
• The acquisition and integration of new content partnerships and international expansion of TF1+ requires significant investment which could strain financial resources and impact earnings if not successful.
  
• Increased taxes in France are expected to raise the effective tax rate, potentially reducing net profit margins.

Valuation

• The analysts have a consensus price target of €10.167 for TF1 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 €12.1, and the most bearish reporting a price target of just €7.6.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €2.5 billion, earnings will come to €255.5 million, and it would be trading on a PE ratio of 10.5x, assuming you use a discount rate of 5.8%.
  
• Given the current share price of €7.73, the analyst price target of €10.17 is 24.0% 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.