HSBC trims Sky's target price after third quarter interims

Sky’s shares fell on Friday as HSBC trimmed the broadcaster’s target price to 1,010p from 1,020p and maintained the stock at ‘hold’.

HSBC said while Sky’s third quarter interims on Thursday were in line with the company’s consensus, key performance indicators were soft in places. “In particular, concerns are likely to centre on churn and net additions,” HSBC added.

Sky won 177,000 new customers in the three months to March, 160,000 fewer than the previous quarter. Both the number of new broadband customers and TV customers eased. The slowdown sent shares lower on Thursday, despite the group reporting a 5% increase in revenue to £8.7bn and a 12% rise in operating profit to £1.14bn in the nine months to the end of March.

“Churn stepped up quarter-on-quarter in the UK (10.7% versus 10.2%) and in Italy (11.0% versus 9.9%). As Sky has lost Champions League coverage in both markets, this raises the issue of the company’s relative competitiveness,” HSBC said.

The bank said its view was that “a number of ‘known unknowns’ provide an overhang” to near-term share performance.

It noted that Germany's federal cartel office has approved plans to stop any single buyer from winning all the live television rights for Bundesliga soccer matches for the four seasons starting in 2017. This would mean Sky, which virtually won all live broadcasting rights in the last auction, would be unable to achieve the same in the next auction.

HSBC said there is also uncertainty over Mediaset Premium’s future plans following its acquisition by Vivendi. Vivendi chairman Vincent Bolloré said he plans to launch a streaming service to rival Sky’s pay-TV outfit and Nexfix.

Meanwhile, the UK outlook is somewhat uncertain ahead of Britain’s referendum on its European Union membership on 23 June, HSBC added.

Shares were down 0.48% to 980.28p at 0951 BST.