Nine Entertainment Downgraded by Goldman Sachs Amid TV Reliance Concerns

Goldman Sachs has downgraded its rating for Nine Entertainment, a major media conglomerate in Australia, from "buy" to "neutral," while setting a target price of 1.75 Australian dollars. The decision comes after the company completed a significant asset divestment, which has increased its reliance on its television business segment. This adjustment follows the release of Nine Entertainment's 2025 fiscal year earnings report, which showed that its earnings before interest, taxes, depreciation, and amortization (EBITDA) met expectations, while its net profit exceeded expectations by 11%. The company's streaming service, Stan, also performed better than anticipated in terms of both profit and user growth.

Following the sale of Domain Holdings Group (DHG), Nine Entertainment announced a special dividend of 49 Australian cents, reaching the upper limit of the previously announced range of 47-49 Australian cents. The company also hinted at potential further capital management plans for the 2026 fiscal year. However, Goldman Sachs expressed concerns about the outlook for Nine Entertainment's television business in 2026, noting that second-quarter revenue is expected to remain flat while costs continue to rise. The investment bank also highlighted that the company's capital expenditure plans for 2026 exceed expectations.

Post-DHG divestment, 47% of Nine Entertainment's revenue now comes from its television business, up from 33% previously. This increased exposure to a sector that Goldman Sachs views with caution is a significant factor in the downgrade. Despite the stock's 49% year-to-date gain, Goldman Sachs' target price of 1.75 Australian dollars represents a 5% downside from the latest closing price of 1.84 Australian dollars.

The downgrade reflects Goldman Sachs' concerns about the company's increased reliance on its television business, which has shown signs of weakness. The investment bank's analysis suggests that the television sector's challenges, coupled with rising costs and higher-than-expected capital expenditures, could impact Nine Entertainment's financial performance in the coming year. The company's decision to focus on its television business, following the divestment of DHG, has raised questions about its strategic direction and ability to navigate the evolving media landscape.

Nine Entertainment's streaming service, Stan, has been a bright spot, with strong performance in both profit and user growth. However, the company's overall financial outlook remains uncertain, given the challenges in the television sector and the potential for further capital management initiatives. The special dividend announced following the DHG sale provides some immediate returns to shareholders, but the long-term impact on the company's financial health remains to be seen.

In summary, Goldman Sachs' downgrade of Nine Entertainment to "neutral" reflects concerns about the company's increased reliance on its television business and the potential challenges it faces in the coming year. While the company's streaming service has shown promise, the overall financial outlook remains uncertain, and investors should approach the stock with caution. The target price of 1.75 Australian dollars suggests a potential downside of 5% from the latest closing price, highlighting the need for a cautious investment strategy.