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April 07, 2009

Discovery Communications Catches a Downgrade

I'll bet you would be shocked to learn that there is a media stock trading above its mid-September, pre-crash levels. It's true. Discovery Communications (DISCA) is up about 5% thanks to a restructuring from a tracking stock to a regular stock, two positive quarterly earnings surprises, strong ratings for its TV networks, and still positive domestic advertising growth.

In typical Wall Street fashion, the recent strength in the stock was met by a downgrade today as Natexis went form buy to neutral after the stock reached its price target of $18. I've been thinking the stock could be getting a bit ahead of itself so the downgrade is not surprising. I don't think the stock will get abused as management is sending signals that 1Q went pretty well via press releases. Nevertheless, I am looking to trim the stock as the relative strength has caused my position size in percentage terms to balloon. For those non-money managers out there most professional closely monitor position size and cut back at certain thresholds.

Posted by Steve Birenberg at April 7, 2009 12:08 PM in DISCA