What is Happening to the Seven West Media Share Price?

What does SWM do?

Seven West Media [ASX:SWM] is a media company, predominantly exposed to free-to-air television. It owns the Seven Network — the highest rating network, ahead of Nine and Ten.

Free-to-air television is one of those ‘structurally challenged’ industries. The advent of different types of media means TV networks no longer command the influence they did in years gone by. The TV advertising market is now mature and low growth.

While SWM still generates significant cash flows, owning to its dominant industry position, the industry is now considered a low growth one.

What’s happening to Seven West Media’s share price?

The SWM share price has been volatile lately. After rising strongly from the lows reached last year, the shares corrected lower. Then, on Tuesday, the share price dropped 10%, before bouncing around 7% today.

What’s going on?

Earlier this week, SWM’s rival Nine Entertainment [ASX:NEC] warned that its TV advertising revenues would be lower. It also said it expected the TV ad market to grow slower than it previously forecast.

The warning hurt SWM’s share price too, as you can see in the chart below.

Seven share price 07Apr16

Source: BigCharts

What now for SWM?

While the industry has its challenges, SWM remains well placed. As mentioned, it generates strong cash flows, which allows it to pay a healthy dividend. Based on forecasts for 2017, SWM trades on a dividend yield of around 7.5%.

Given the rally to nearly $1.10 from the low of nearly 65 cents in November last year, a pullback shouldn’t be surprising. So far, the correction hasn’t disrupted the share price uptrend that got underway earlier this year. Given the attractive valuation, it suggests this is a good buying opportunity.

Never assess a stock’s fundamentals without looking at the chart too. Combining fundamental analysis with charting can yield powerful results.

If you’d like to know more, click here.

Greg Canavan
Editor, Markets and Money

 


Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing. He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’. Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

 


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