Jefferies Likes Large Cap Media, Sees Potential For M&A

Jefferies analyst John Janedis believes that media stocks will surprise to the upside this earnings season. In a new report, Janedis notes that, despite the media industry being caught in a bear market, the Q4 ad market remained strong.

Jefferies expects the strong ad market to persist at least through Q2 of 2016, a major earnings-driver for media stocks. “The stock market continues to dismiss the advertising demand on doubts related to sustainability, focusing more on sub trends and terminal values,” Janedis explains.

Related Link: Lachapelle: Don't Be Surprised If Fox-Time Warner M&A 'Comes True' 

He also mentions the possibility of M&A activity as a potential driver for several top stocks in the space in 2016.

Jefferies’ top media stock picks include Buy-rated CBS Corporation (NYSE: CBS), Lions Gate Entertainment Corp. (USA) (NYSE: LGF), Live Nation Entertainment, Inc. (NYSE: LYV), Time Warner Inc (NYSE: TWX), Twenty-First Century Fox Inc (NASDAQ: FOXA) and Viacom, Inc. (NASDAQ: VIAB).

Disclosure: the author has no position in the stocks mentioned.