There's a new analyst in town
Mark Wienkes is out with his first stock coverage since being tapped by Goldman Sachs to handle the radio sector. But of the eight terrestrial and two satellite radio stocks he's analyzed, he only finds two worth buying right now - - Westwood One and Clear Channel - - and he's negative on Radio One and Sirius.
"Radio is a traditional advertising revenue-driven industry and pricing power in radio is weak, so sector fundamentals are subpar, valuations are full, and catalysts are lacking," Wienkes said in summing up his view of the industry. He sees terrestrial radio as mired in a single-digit growth mode and is looking for revenues to grow only 2% this year.
If you've guessed that the new analyst is a big fan of satellite radio - - you're wrong. Wienkes thinks the Wall Street consensus that XM and Sirius combined will hit 45 million subscribers by 2013 is overblown. He projects 36 million. And, despite all the excitement over Sirius signing Howard Stern, the Goldman Sachs analyst thinks the more important factor is the companies' deals with automakers for factory installs - - so he expects XM to maintain a subscriber edge over Sirius as far out as anyone can see. As such, he thinks Sirius' stock is overpriced - - and XM about right.
Also about right are five of the eight terrestrial radio stocks that he's now following - - Entercom, Cumulus, Cox Radio, Emmis and Citadel - - so they're ranked "in line" for the sector. His two outperforms go to Westwood One and Clear Channel. With satellite radio, iPods, broadband streaming and such threatening to take listeners from terrestrial radio, he figures Westwood One's secret weapon is content that it can reposition across multiple platforms. As for Clear Channel, Wienkes figures the current impact of "Less is More' creates a buying opportunity for "compelling value."
While other analysts are still hot on Radio One for consistently outperforming the industry in ratings and revenue growth, Wienkes thinks the company will be unable to sustain that pace, so he's pegged its stock as "underperform."
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