Stock of the day 15/10/2015 – Sky PLC

It’s been a record-breaking year for Sky, even if its growth has faltered since July; can its first quarter result next week reignite the stock’s climb?

Sky has been busy since the very beginning of the year as it continued to go toe-to-toe with BT for UK telecoms and media dominance. After starting 2015 at £9, by the end of February the stock had risen above £10 for the first time in its history following a series of ambitious moves. First was the end of January announcement that Sky would be entering the mobile phone services arena in 2016, striking deal with O2-owner Telefonica just a month after fierce-rival BT had bought EE. This was soon followed by its start of February first half results, with Sky posting a 16% rise in adjusted operating profits to £675 million alongside a 5% increase in revenue to £5.6 billion.


(Source: IT-Finance.com 15/10/2015)

Mid-February then saw the company get what is arguably the jewel in its crown, securing 126 Premier League games a season starting in 2016, costing a whopping £1.39 billion per year on a three year contract. Whilst this news initially saw investors balk at the price-tag, Sky soon resumed its climb, touching £10 by the end of the month.

The company held onto this growth through March, before speculation at the start of April about a bid from French conglomerate Vivendi saw it hit £10.50. Its third quarter results at the end of April continued its run, a quarter that contained its best customer growth (127,000 added) for 11 years, cherry-on-topped by a 20% jump in group profit to £1.02 billion for the 9 months to the end of March.

Its post-release surge left Sky achingly close to the £11 mark, only for the company to slide across May and the start of June, culminating in a 2 month low of £10.10 as BT launched its exclusive Champions League offer. Sky lifted away from these lows, however, with more takeover speculation towards the end of June, before soaring in July following a ‘buy’ rating from Deutsche Bank and a strong set of full year results, including a 45% increase in subscriber growth to 973,000, a milestone 12 million UK and Ireland customers AND a 6% rise in pre-tax profit to just shy of £1.2 billion.

Yet the £11.79 all-time high hit in the aftermath of these figures wasn’t to last long, and a sharp downturn in August and September, endemic to the market as a whole but exacerbated by a ‘sell’ rating from Liberum Capital, left it languishing below the £10.50. October has seen a slight recovery for the stock, and whilst it hasn’t quite managed to climb all the way back to its July highs, it is at a current trading price of £10.73 (IT-Finance.com, 15/10/2015).

Sky PLC has a consensus rating of ‘Hold’ with an average target price of £11.10.