Movers and SHAKERS
Image Credit: EW Scripps Website
Don’t Touch that Dial, Broadcast TV Will be Right Back
Are broadcast TV stocks cheap? While audiences show up and tune in to live events, including sports and news, a high percentage of movie and TV series viewers have become cord-cutters and have shifted to streaming their entertainment. Ad dollars are now being split to stay with the right demographic and appropriate audiences, wherever they are. By many measures, the older broadcast networks, including local TV, are not getting the attention from investors that newer streaming companies experience.
In a recent article in Barron’s, the publisher points to the low valuations where many broadcast TV stocks are trading. It mentions point the country's (U.S.) largest station owner, Nextar Media (NXST) as an example. According to the publication, $NXST is trading at six times its estimated 2022 earnings. Contrast this with Netflix (NFLX) which trades at 49 times earnings. Many of the broadcast companies continue to generate large amounts of cash flow from advertising and fees paid to cable, satellite, and internet services, including apps of major networks.
The Barron’s article also points to Atlanta-based Gray Television (GTN) as an example. At its current price ($23.30), the stock has a P/E ratio of five times 2022 earnings estimates. The reporting goes on to point out that the broadcaster has been in acquisition mode and made some strategic acquisitions. If the deals close, they will reach 36% of U.S. households in December and operate in 113 markets.
One of the many strengths $GTN has is its local news power. Local political campaigns look to reach the most people for each dollar spent. Gray brings in more political-ad dollars per household than any other station group. Further, many of its stations are in battleground states, including nine of the 10 markets expected to have the most competitive Senate races next year.
Another interesting company known for its pre-broadcast beginnings is E.W. Scripps (SSP). The company is the nation’s fourth-largest TV broadcaster. The $SSP networks can reach almost every U.S. citizen, whether it’s through traditional broadcast, on their newly acquired ION network, or their own distribution available on apps designed to retain cord-cutters.
According to the Nasdaq website, E.W. Scripps is trading at a P/E of 4.94 against 2022 estimates. In a recent Channelchek C-Suite interview, management discusses the company's leadership with their own large networks and businesses and expansion onto multiple platforms. They’re essentially in two marketplaces with continued growth locally and nationally.
As investor attention usually turns to the latest “shiny object,” attention often turns away from what was getting recognition yesterday. Often, these older businesses are well run and shifting to capitalize on changing times. While they are receiving less attention, investors scout out value.
We scratched the surface by discussing two of the three media companies mentioned above. There is a trove of more information on GTN and SSP on Channelchek, as well as many other companies in this category. We urge you to explore the C-Suite video interviews below with the management of media companies.
Salem Media Group
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