Why bid target Sky is firing on all cylinders
Richard Hunter, Head of Markets at interactive investor, commented "In media terms, Sky (SKY) is currently the belle of the ball, attracting overseas suitors aplenty. This update is another vindication of the interest being shown.
Even with its ambitious growth plans, Sky has managed to keep costs flat while posting a 22% jump in operating profit.
The group has further added to its 23 million subscribers, whilst its partnerships with the likes of Netflix (NFLX) and Spotify both reflect the current trends and provide scope for greater expansion.
Sky continues to broaden its offering, with Sky Mobile and Sky Q already showing signs of promise. The success of the recent Premier League auction means that any concerns around escalating football rights costs can now be locked away until 2022.
Source: interactive investor Past performance is not a guide to future performance
Disappointments within the statement are few and far between. There is some pressure on the Germany/Austria business which is currently being addressed, whilst the company has drawn attention to the challenging economic environment.
The bid situation could prove something of a distraction for management (although there is currently little evidence to suggest this is the case) and from an investment viewpoint, the projected dividend yield of 2.7% is unexciting.
Even so, for the most part Sky is firing on all cylinders. The market is clearly factoring in further developments on the bid situation, with the current level being far above any disclosed offers.
The shares have risen 34% over the last year, as compared to a 2.4% hike for the wider FTSE 100 (UKX), and 31% in the last three months alone. The strength and potential which Sky is displaying is an attractive proposition for bidders and investors alike, with the market consensus of the shares as a buy very likely to remain intact."
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