Since October 2021, the communications sector has lagged the S&P 500, down around 34% year-to-date (as of September 9).
As the economy braces for a possible recession, TV network operators are hoping to generate revenue from advertisers and subscribers.
The Analyst: Rosenblatt Securities senior analyst Barton Crockett updated sector Leader Nextstar Media Group Inc. NXST from Neutral to Buy with a price target of $246, forecasts a 36% upside potential from September 6th.
The Texas-based company, the largest owner and operator of television stations in the U.S., offers a dividend yield of 1.84%, or $3.60 per share annually using quarterly payments, with a strong track record of growing its dividends over the past nine years .
Nexstar, which has 199 channels in 116 markets, is connected to the four national broadcasters – CBS, Fox, NBC and ABC – and networks in 12 of the top 20 television markets and reaches over 68% of American television homes.
The central theses: TV networks can offer resilient ad revenues despite the recession risk, particularly in the political entertainment spectrum, which is expected to generate over 50% of its ad revenues in the first half of 2022, Crockett said.
In the second quarter of 2022, political ads were 80% higher than in the second quarter of 2018.
Nexstar is also hedged against cord cutters through the inclusion of its CBS and NBC affiliates Paramount Global PARAGRAPH and peacock.
With Nexstar owning a 75 percent interest in the Paramount and Warner Bros. CW network, this represents an opportunity to improve a network that Nexstar believes has been undermanaged and could potentially be the best return on investment.
Excluding political ads, Nexstar’s core TV ads fell 2.5% in the second quarter as sports betting and car ads posted sharp declines, with much of the growth coming from entertainment sector (Movies and TV…
