UBS: Outlook Dims for Ad Revenue


NEW YORK Wall Street continues to turn more bearish on the outlook for U.S. advertising growth.

Amid weak ad trends reported by most media and entertainment giants in the latest quarter, UBS analyst Michael Morris on Thursday lowered his 2008 and 2009 domestic ad revenue growth estimates for the large entertainment companies to 2.9 percent and 0.7 percent from 4.1 percent and 2.5 percent, respectively. He also lowered his 12-month price targets on Disney, as well as News Corp. and Viacom, which have reported weakening ad momentum.

He also cited a sluggish U.S. economy as a key challenge for the industry. "Our updated outlook reflects negative advertising trends and the recent downward revision to UBS' 2009 U.S. GDP growth forecast," Morris wrote in a report. "Advertising growth has historically been highly correlated to GDP growth."

Given a sudden decline in ad momentum reported by several sector biggies, he predicted that advertising is "likely to worsen before it improves."

The analyst also cited UBS advertising contacts as saying that 2009 budgets are coming in "primarily flat," indicating downside to Morris' prior estimates, particularly in TV.

For Disney, the analyst lowered his calendar year 2008 ad growth estimate to 2.3 percent from 3.4 percent. For calendar year 2009, he cut it to 1.6 percent from 3.8 percent.

He reduced News Corp.'s ad gains estimate from 5.3 percent to 4.7 percent for calendar 2008 and from 0.1 percent growth to a 1.1 percent decline in calendar 2009.

Morris' Time Warner ad growth estimates dropped to 1.3 percent from 3.5 percent for '08 and to 2 percent from 4.6 percent for '09.