Sky share price in focus as analysts flag major cost spikes

Sky (LON:SKY) is expected to encounter more major cost spikes due to soaring football broadcasting fees, Haitong Research has said. The comments came as the analysts reiterated their bearish stance on the pay-TV provider.

Sky’s share price has slipped into the red this morning, having shed 0.75 percent to 1,003.39p as of 09:59 BST, and underperforming the benchmark FTSE 100 index which currently stands 0.23 percent lower at 6,185.91 points. Sky’s shares have lost just under five percent of their value over the past year, and are down nearly 10 percent in the year-to-date.
Analysts at Haitong Research reiterated their ‘sell’ stance on Sky yesterday, with a price target of 857p. The broker’s analyst John Karidis was quoted as forecasting that the broadcaster’s English Premier League content cost would soar 83 percent next year.

“Also Bundesliga rights will be re-auctioned shortly and the UK experience suggests these are worth more to big ‘telecom + pay TV’ service bundlers than to Sky Deutschland,” the analyst added. The comments come after Reuters reported yesterday that Germany’s federal cartel office had approved plans to stop any single buyer from winning all the live television rights for Bundesliga football matches for the four seasons starting in 2017. The development means that Sky Deutschland which won virtually all live broadcasting rights in the previous auction would not be able to repeat that level of success in this year’s auction.
“We highlighted this risk before so in this note we explain why more big cost spikes are likely in the UK – this market remains the biggest driver of Sky’s share price,” Haitong’s Karidis pointed out. “Linked to this, Sky’s profit and loss costs keep trailing cash costs so its earnings per share numbers continue to be materially overstated.”
Other analysts, however, are more upbeat on Sky, with Deutsche Bank reiterating its ‘buy’ rating on the stock last week, with a price target of 1,500p. Analysts at BNP Paribas meanwhile continue to see the company as an ‘outperform,’ valuing the stock at 1,250p.
As of 10:16 BST, Tuesday, 12 April, Sky Plc share price is 1,003.00p.