Univision Shares Drop Over Azteca News

Shares of Spanish-language broadcast giant Univision Communications Inc. tumbled $4.63, or 11.5%, Friday in response to news that Mexico’s second-largest programmer will push north with an alternate network.

The stock closed at $35.75 on the New York Stock Exchange, a 52-week low, after dropping 6.7% Thursday.

Sutro & Co. media analyst Dave Miller called Friday’s sell-off--in heavy trading that topped 7 million shares--a “tremendous overreaction” to the news of a potential Univision competitor.

Television Azteca and Pappas Telecasting Inc. of Visalia, Calif., on Thursday announced plans to launch Azteca America, a network that would compete with Los Angeles-based Univision. Univision dominates the growing market, with Miami-based Telemundo Network a distant second.

Azteca hopes to acquire enough stations to reach 65% of the Spanish-speaking households in the U.S. by 2002. But the newcomer faces steep hurdles. It must still acquire stations in key markets and raise $500 million in debt and equity financing, Miller said. The potential for success of Azteca programming in the U.S. also remains in question, other analysts said.

Last month, Univision’s stock dropped sharply on news that advance advertising sales for the coming year were not as strong as anticipated. Still, the stock has surged 200% in three years.

“This stock was essentially priced for perfection back when it was at $55,” Miller said. “This is not bad news for Univision . . . but some people are perceiving it as bad news.

“When we value these stocks the most important component is growth. Once people realize that this poses virtually no threat to Univision and that the core fundamentals are still intact, then people will start moving back into the stock.”

Credit Suisse First Boston analyst Paul Sweeney echoed those opinions in a Friday report on the company, maintaining a “buy” rating.

“Although we understand the intent of the new network to tap into the exceptional growth of Hispanic media, we believe it faces significant obstacles in order to become a meaningful . . . competitor,” he said.