Broker view: Why shares in a Sky are a ‘buy’

1st February 2016

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Graham Spooner, investment research analyst at stockbroker The Share Centre, explains why he is backing shares in Sky…

It was a busy week for Sky last week as the company announced in its first half results that it had started the year with good momentum.

Operating profit was up by 12% at £747m, which investors should acknowledge was slightly higher than market forecast. Additionally, the group stated that revenue was up 5% to £5.718m.

News also broke that current chairman Nick Ferguson would be stepping down after 12 years in the role and would be replaced by James Murdoch – son of Rupert Murdoch, part-owner of the UK satellite broadcaster.

Sky experienced the highest customer growth in 10 years in the second quarter as over 337,000 new customers joined the company.

This is a company that now has over 21.5m customers and most importantly it continues to see a solid increase in subscriber numbers and a lower amount of customers leaving. It has been expanding into Europe since 2014 and has operations throughout Ireland, Germany, Austria and Italy.

Investors will note that Sky had to dig deep to keep the right to broadcast the majority of football matches and seen the emergence of BT, who will have other matches and the European Cup as competition. However, CEO Jeremy Darroch believes that the group is well positioned to deliver further strong growth and returns for shareholders, courtesy of an outstanding set of new initiatives and products.

Subsequently, we recommend Sky as a ‘buy’ for medium risk investors seeking income and growth. The ability to win new customers and more importantly, to upgrade to a single package, along with the expansion of products, leads us to believe that the share price could again start to head in the right direction.

It is worth pointing out however, that in the current climate, new investors are advised to drip feed into the shares.

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