Analysts point to cash flow issues and lack of clarity on broadcast renewal
Rogers Communications Inc. is facing renewed scrutiny from investors amid reports of a multi-billion-dollar deal to renew its National Hockey League broadcasting rights, alongside growing concerns about the company’s financial outlook.
A Sportico report revealed that Rogers is expected to sign a 12-year renewal of its NHL broadcast agreement valued at $11 billion, more than twice the $5.2 billion deal it struck in 2013. That earlier contract secured national broadcast rights, including the coveted Hockey Night in Canada games.
The company has not confirmed the report. However, the news appeared to weigh on investor sentiment. Rogers shares dropped 5.9% on Tuesday, closing at $36.17 on the Toronto Stock Exchange—the lowest level since 2012.
The drop came as analysts flagged broader financial concerns, including a revised outlook from Bank of Nova Scotia’s Maher Yaghi. Although he did not directly link the possible NHL renewal to his decision, Yaghi downgraded Rogers to sector perform, pointing instead to weak performance from the company’s banking arm. He described Rogers Bank as a “significant drain” on cash flow over the past two years, citing high costs tied to a newly launched credit card product.
Another revision came from TD Cowen analyst Vince Valentini, who lowered his target price for Rogers from $64 to $62. His analysis suggested that customers’ increasing use of zero-interest device financing through Rogers Bank credit cards could put further pressure on the company’s free cash flow.
On the NHL deal, Valentini noted that investor concerns about the company’s balance sheet and funding challenges could lead to short-term weakness in the stock “if terms of this contract renewal are not clarified soon.” Still, he added: “Once the dust settles, we do not expect this rights renewal to be either a negative for Rogers, nor an overly material event.”
Valentini estimated that Rogers incurred less than $3 billion in operating costs over the course of the original deal. The company also sublicensed portions of its rights to other broadcasters, such as TVA Group Inc. in Quebec.
National Bank of Canada analyst Adam Shine noted the possibility that Rogers could partner with others to spread the cost of the new deal. He also said the agreement could impact the value of the Toronto Maple Leafs, which Rogers partly owns through its 37.5% stake in Maple Leaf Sports & Entertainment Ltd. (MLSE).
“Escalating costs of premium sports content is sure to lead to material hikes in the price of Sportsnet subscriptions at a time when streaming costs are steadily rising and aggregating to sums that had previously triggered cord-cutting and cord-shaving among linear TV subscribers,” Shine said.
