A persistently weak advertising market has led to warnings that a recovery in media stocks will not occur until 2014.
The downbeat assessment comes amid another round of steep falls in the share prices of many media stocks this week.
Commonwealth Bank equities analyst Alice Bennett this week slashed the earning-per-share target for Ten Network by 75 per cent and for Seven West Media by 31 per cent, after the companies turned to the equities markets to raise capital to pay down debt in the past two months.
The next biggest downgrades came at regional television and radio player Prime Media Group, job recruitment website Seek and newspaper and outdoor advertising business APN News & Media.
The average earnings-per-share target for the media sector was cut by 10 per cent, with price targets reduced by 14 per cent. Valuations of media stocks across the sector come down by 6 per cent on average, with Seven down 16 per cent, Prime down 14 per cent, and Seek down 11 per cent.
CBA changed Fairfax's valuation from sell to hold, citing more conservative top-line growth assumptions over the next two years.
Fairfax recently announced a major restructuring and the loss of 1900 jobs to revive its earnings-pressured business and prepare the company for a transition to a digital-centric model.
CBA said it had lowered its expectations for a recovery because forward indicators suggested deteriorating momentum in the 2013 financial year.
It pointed to uncertainty in the domestic and global economic environment, flat one-year forward US corporate earnings, and reduced forecasts for growth in traditional media such as television and print.
The advertising growth forecast for this calendar year has been reduced from 1.6 per cent to 0.4 per cent, with a sharper 4.2 per cent cut for traditional media. The growth outlook for 2013 has been slashed from 3.8 per cent to 1 per cent, with traditional media's growth cut by 3.3 per cent.
CBA is predicting an advertising recovery in calendar-year 2014, with growth up 3.8 per cent.
"We've been bottom feeding for a couple of years. We're saying a recovery won't happen next year, but we hope it will occur in 2014," Ms Bennett said.
Her top pick in the media sector remains News Corporation (publisher of The Australian), while radio group Southern Cross Austereo is also favoured for "defensive earnings".
Fairfax and Ten are the least preferred stocks.
A Ten executive said the network was engaged in the early stages of a turnaround strategy and pointed to a number of positive moves, including the disposal of outdoor advertising business Eye Corp for $140 million, and a successful $200m capital raising in June.
The network is rolling out new programs and has set high hopes on the Sarah Murdoch-fronted show Everybody Dance Now and the drama, Puberty Blues.
In yesterday's close of trading, Ten's shares were unchanged at 47c, and Fairfax's shares fell 3.77 per cent, down 2c at 51c.
Seven West Media shares were down 0.32 per cent, falling 1c to $1.54.
APN News & Media shares were flat at 53c, and Prime climbed 1.45 per cent, up 1c at 70c.
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