Market Soars; Media Stocks Soar Higher
The Dow Jones Average rose 490 points on Wednesday -- up 4.2 percent -- but many media stocks soared even higher. While none of them were directly affected by the major driving forces of the upsurge -- an increase in hiring by private businesses in the U.S.; word that central banks will cooperate to find a solution to the European debt crisis; and a relaxation of China's lending policies -- many of those developments did affect their customer base -- in particular advertisers, who have been retrenching severely as the overall economy has deteriorated. CBS Corp., which depends more on advertising revenue than most other media conglomerates, saw the biggest gain. It rose 5.8 percent to $26.04. The Walt Disney Co., which owns ABC and ESPN and which increased its dividend a whopping 50 percent on Wednesday, rose 5.44 percent to $35.85, while News Corp, which owns Fox, was up 5.56 percent to $17.85. The single loser among media stocks was the free-falling Netflix, which was down 2.3 percent to $64.53. The DVD rental company's shares were pummeled after Wedbush analyst Michael Pachter said in a research note to clients that the company's business model is broken. Pachter reduced his rating to "underperform" from "neutral" and predicted that the stock will fall to $45. He also sharply criticized Netflix's plans to expand in Europe and Latin America. "We think that international subscribers will generate losses for the foreseeable future at a time when the company has alienated its most profitable domestic customers with its sharp price increases, further challenging its profitability," he said.