What Happened to Nine Entertainment’s Share Price?
Shares in TV network Nine Entertainment [ASX:NEC] jumped as much as 15.2% today to the highest level since November last year. The stock price has been volatile over the past 12 months. After peaking around $2.40 in March last year, it fell to around $1.60 in January 2015. It has rebounded strongly over the past months.
Why Did This Happen to NEC Shares?
The rebound in the share price is more about low interest rates than better earnings. Today, NEC announced a 2% fall in revenue and a 6.4% decline in underlying net profit. Despite weaker earnings, the company announced a share buyback, which is typically good for short term share price performance.
What Now for Nine Entertainment?
The Aussie economy is sluggish, which means the advertising market will remain tough for NEC. The share buyback gives the market confidence, as it is an indication that management thinks the stock price is good value and worth buying at these levels. NEC does look like good value, but that reflects the company’s low growth environment. The best investors can hope for is more interest rate juicing pushing stocks higher as investors chase dividend payers. NEC yields a bit under 5%, which is attractive in this low interest rate world.
for The Daily Reckoning