Alex Heisenberg of Seeking Alpha believes that television group Gray has already benefitted from political, will continue the benefit from the resurgence of automotive, and has a few other positives up its sleeve, and believes it will run with the bulls.
With results being announced soon for the final quarter of 2012, Heisenberg is counting on Gray’s claim that its political income was much better than expected. It will have had income from that stream for the entire month of October heading into Election Day.
Political will be in its down cycle this year, one of the risks associated with Gray, but it won’t affect Gray’s resurgent automobile income. That stream figures to continue in a robust manner during 2013, particularly since finance companies are finding car loans to carry a very low risk factor. They are willing to lend, which added to a large supply of pent-up consumer demand means dealers will likely keep on selling and booking air time.
Another huge factor in Gray’s favor is the success of its refi efforts. It is anticipating a $10M decrease in annual interest expense this year as a result, to about $49M.
Another reason to be optimistic are similar positive reports from other television groups.
The risk factors, in addition to the off-year for political, include a sudden downturn in the economy, an event which usually hits media companies in the first wave; and the volatility of the entertainment business, or in other words, Gray’s susceptibility to ratings reversals.