Broker Watch

Why Goldman Sachs rates Nine Entertainment shares a Buy

Thu 09 Feb 23, 4:31pm (AEST)
Competitors race one another in a butterfly style swimming race in an olympic length swimming pool. Swimming is one of the largest events of each Olympic games
Source: Unsplash

Key Points

  • Goldman Sachs says Nine (NEC) is a BUY but Seven (SWM) is a SELL
  • Goldman Sachs bullish on Nine given that it has won eight-year broadcasting rights for the Olympics, capturing QLD 2032
  • Goldman Sachs isn’t so sure how people will feel about being paywalled to watch Olympics, which it expects will happen via Stan

Earlier this week, Nine Entertainment Co (ASX:NEC) won out over Seven West Media (ASX:SMW)  for eight years of Olympic broadcasting rights starting in 2024 and running into 2032.

Goldman Sachs has paid attention, and slapped a BUY rating on NEC, with a 12-month price target of $2.50, reflecting a Total Shareholder Return (TSR) of 12.7%. 

As at 1450 AEST Thursday 9 February 2023, NEC’s share price is trading at $2.20. 

Goldmans has also downgraded SWM to a SELL.  

The bank gives SWM a price target of $0.43, reflecting a negative TSR of -8%

Why is Goldman Sachs bullish on NEC? 

The investment bank expects positive upside for the share price in the short-term, but it also has its eyes on a longer-term development. 

In 2032, Brisbane will host the international Olympic and Paralympic Games.

Nine will hold the broadcasting rights for the event that year (the same year its broadcasting agreement expires).

“We believe the Brisbane 2032 games will be a flagship event with outsized viewership (given the Australian location), with the Sydney 2000 Games (broadcast by SWM) driving >4% share gains in FY01,” Goldman Sachs analysts wrote on Thursday. 

“[This] is well ahead of the 1-2% share benefit usually generated from Summer Olympics broadcasting.” 

Key risks 

The research note from Goldman Sachs was not without its caveats. 

“The key uncertainty in our view relates to the use of Stan Sports and its respectively paywall,” analysts wrote. 

“Media reports suggest some content will be unique on Stan, despite PayTV providers in the past having to differentiate coverage through lower ad loads/higher broadcast quality.” 

The media reports in question Goldman Sachs analysts were looking at relate to an Australian Financial Review piece published on Wednesday. 

That article quoted Nine’s strategy executive Matthew Stanton as saying “there will definitely be some streaming as well,” though Stanton mused high-interest events would be free to air.

Given that’s eight years away, and Stanton might not even be in the role at that time, it’s a remains-to-be-seen type of consideration. 

Goldman Sachs also has its eyes out for NEC’s upcoming 1H23 report. 


A look at NEC's one year chart
A look at NEC's one year chart


Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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