At last! A quarter of stock price improvement

It’s still way too early to call it a recovery, but Wall Street is signaling that the worst days for most publicly traded broadcasting companies are behind us. Nonetheless, many companies are still dealing with leverage problems and a return to a robust advertising market is far over the horizon, so the stock price improvement for many broadcasters in Q2 may be more a bounce from extreme declines than true enthusiasm about near-term business prospects.

On the radio side, three stocks are now up triple digits for the year to date, although we would caution that all three remain deep, deep in penny stock territory.

Sirius XM continued to move up after being rescued from the brink of bankruptcy by Liberty Media Halfway through 2009 the satellite radio stock was up 258% and will likely escape penny stock hell with a coming reverse split. It closed Q2 at 43 cents per share and CEO Mel Karmazin has locked in rights to buy 120 million shares at that price.


Tiny Debut Broadcasting, a radio syndicator and small market station owner, was just behind Sirius XM in stock price growth, moving up 257% in the first half of the year. Regent Communications, also a specialist in smaller markets, but a much larger company, saw its stock price gain 178%.

At the other end of our radio stock list, Citadel Broadcasting has stated that it is likely heading for a financial restructuring which may dilute or wipe-out current shareholders. Its stock price, which had already been battered from its IPO at $19 in 2003, dropped 75% in the first half of this year to four cents per share.

Quite a few pure play radio companies have posted double digit percentage gains in their stock prices through the first two quarters of 2009, although most are also still in penny stock territory. That also means that they have little or any analyst coverage, since most Wall Street firms have fired or reassigned the analysts who used to cover radio stocks. In line with the component stocks, the RBR Radio Index gained 44% through the first half of 2009.

The story is much the same for television stocks. Many of the pure-play groups are now up double digit percentages through the first half of 2009. Generally faring less well are those media companies which, while they own TV stations, are primarily in the newspaper business. The TVBR Television Index was up 35% through the first two quarters of 2009.

Topping the TV stocks list is Spanish Broadcasting System, which has been growing its still-young TV side, but remains primarily a radio company. Its badly battered stock was up 80% through the first half of the year. LIN, a pure-play TV company, gained 54%, and pure-play Nexstar rose 47%, although both remain well down in penny stock territory. Sandwiched between them is Meredith, up 49%. It is publishing and television, but its publishing side is magazines and books – and very targeted ones at that – so it has not suffered the type of advertising declines seen at newspaper companies.

At the bottom of our TV list is Entravision. Early on in the advertising recession there was some thinking that Hispanic media would have some degree of immunity to the ad declines hitting general market media, but that proved not to be the case, so Entravision’s stock price may have hit bottom a few months behind its English-language brethren.
 
The next two are easy to explain. Journal Communications, down 57%, is in both broadcasting and newspaper publishing. Gannett, down 55%, is the nation’s largest newspaper chain and also owns a TV group.

In the course of Q2 two broadcasting stocks disappeared from our lists. Hearst-Argyle Television and Cox Radio were both taken private, with their majority owners – Hearst Corporation and Cox Enterprises, respectively – buying out the small amount of shares that were still in public hands.

No doubt the CEOs of many other radio and TV companies would salivate at the prospect of going private. No other company, however, has a major shareholder with the wherewithal to simply buy in all other shares. (OK, Westwood One is an exception, but the Gores Group has committed to keeping WW1 public and is even preparing to sell some of its shares in a coming public offering.) Even if you could find a private equity backer with money and interest in the broadcasting sector, there is simply no financing available to get the deal done. Someday the financial markets will improve. But by then the stock prices will likely have improved as well, making it less attractive to try to buy out the public shareholders. And so it goes.

–Jack Messmer

Radio stock performance, 1st half 2009

Television stock performance, 1st half 2009

© 2009 Radio Business Report, Inc.