Sky’s the limit for BSkyB

British Sky Broadcasting Group will reveal its first-half figures on Wednesday 4 February.  

Sky logo
Source: Bloomberg

Sky had a solid start to the financial year, as first-quarter operating profits jumped by 11% to £316 million compared to analyst estimates of £311 million. The TV division added 46,000 new customers and the broadband business added 75,000 during the period. Even larger growth was experienced at the Sky Store, which saw a 125% increase in revenue, and Sky Go Extra – which allows subscriber’s to access shows on tablets and phones – which had a record quarter in terms of adding new customers. The figures for the three months up to the end of September were the final set to be released before Sky Italia and Sky Deutschland are included.

When Sky took over Sky Italia and acquired an 87.45% stake in Sky Deutschland, its customer base increased by 20 million. The group now operates in five countries, and there is speculation that its expansion hasn’t stopped there. The Leeds-based company has recently sold its 80% stake in Sky Bet to CVC partners for £600 million, to remain a minority shareholder, and is rumoured to use the proceeds from the sale to beef up its stake in Sky Deutschland.

Sky currently offers landline, TV and broadband, and there is talk it is looking to break into the so-called ‘quad play’ market and include mobile services.  A partnership with O2 is one possibility for Sky, but neither company has confirmed such a deal. Sky is not the only London-listed company looking into such expansion, however; as Alastair McCaig has previously stated, there is speculation that BT are also interested in acquiring O2.

Sky will announce its first-half figures on Wednesday 4 February, and the consensus is for revenue of £4.95 billion and adjusted net profit of £497 million. The company will reveal its full-year figures in July and traders are anticipating revenue of £11.92 billion and adjusted net profit of £924 million. These forecasts represent a 48% rise in revenue and a 1.3% drop in adjusted net profit.

Equity analysts are moderately bullish on the stock; out of the 33 recommendations, nine are buys, 14 are holds, and 10 are sells. The average target price is £9.41, which is marginally above the current price. Investment banks hold a bullish outlook on BT Group, and, out of the 26 ratings, 14 are buys, six are holds, and six are sells. The average target price is 446p, which is 6% above the current price.

The share price has been in an upward trend since October 2008, but the stock has been stuck in the £9.50-8.40 range for the past year. The share price is currently trading at the high-end of the range. The price £9.50 is acting as resistance, and if this level is cleared it will become support, with £10 the target. Acting as immediate support is £9; if this level is punctured, the downside support of £8.40 will be brought into play.

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