Fairfax rally leads upbeat media outlook
Brokers finally found something to like in the embattled industry.
Shares in Fairfax, the owner of The Age and The Sydney Morning Herald, rose more than 11 per cent to 54¢, after Commonwealth Bank Equities analysts upgraded their valuation of the stock from 43¢ to 59¢. The broker raised its earnings assumptions for Fairfax's real estate classifieds. "The key change in our assumption is around the strength of Domain's print margins, which we estimate at 30 per cent versus its digital margins at 35 per cent," said CommBank media analyst Alice Bennett.
APN shares also posted a double-digit rise - up 10 per cent to 31.5¢ - while Seven West Media rose 3 per cent. Ten has also managed to recover most of the ground lost after its recent capital raising priced at 20¢ a share, closing at 26¢.
"There does seem to be a solid improvement in sentiment towards companies like Fairfax," said Allan Gray portfolio manager Simon Mawhinney. The investment firm owns substantial holdings in Fairfax and APN. Mr Mawhinney was cautious about predicting a turnaround in the sector, with many stocks still trading significantly below where they started the year and with no signs of recovery in advertising.
"In terms of the advertising market it's not clear if we've found the bottom," he said. "It is incredibly difficult to make a prediction like that."
Commonwealth Bank said News Corp, Fairfax, Seven West Media and Southern Cross Media remained its preferred stocks in the sector, with the struggling Ten network its least preferred.
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Fairfax shares jumped after Commonwealth Bank Equities upgraded its valuation of the stock from 43¢ to 59¢. The broker raised earnings assumptions for Fairfax's real‑estate classifieds (Domain), and the stock rose more than 11% to about 54¢ on the news.
Commonwealth Bank Equities increased its fair value estimate for Fairfax from 43¢ to 59¢ and lifted earnings assumptions tied to Fairfax’s real‑estate classifieds business. The broker highlighted Domain margin assumptions — estimating print margins at about 30% versus digital margins around 35%.
APN shares rose strongly, up about 10% to 31.5¢, while Seven West Media recorded a more modest gain of roughly 3% during the same trading session.
Ten completed a capital raising priced at 20¢ a share. After that placement, the stock recovered most of the lost ground and closed at about 26¢.
Portfolio manager Simon Mawhinney from Allan Gray said sentiment toward companies like Fairfax appears to be improving, but he remained cautious. He noted many media stocks are still well below where they started the year and that there are no clear signs advertising has recovered, so predicting a sector turnaround is difficult.
Commonwealth Bank named News Corp, Fairfax, Seven West Media and Southern Cross Media as its preferred stocks in the sector, while it listed the Ten network as its least preferred stock.
CommBank’s revised outlook assumes Domain’s print margins are around 30% and digital margins around 35%. That mix and margin outlook lifted earnings expectations for Fairfax’s classifieds business, contributing to the higher valuation and share price uplift.
Not necessarily. The article reports improved sentiment and broker upgrades, but also highlights caution from investors and fund managers: many media stocks remain significantly down for the year and advertising recovery is still uncertain. Everyday investors should treat the rally as a positive sign but remain cautious and look for clearer evidence of sustained recovery.
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