BofA analyst goes negative on TV

Belo, Hearst-Argyle and LIN are saw their stock prices fall yesterday after Banc of America Securities analyst Jonathan Jacoby cut them to "neutral" from "buy." Jacoby said this year's election dollars are already priced into the stocks and there's a risk that some groups not in battleground states could come up short on political revenue expectations.

"While quite robust," Jacoby said political ad buys are more concentrated than in past elections and might not pressure the entire TV marketplace. Rather, inventories will be tight in some places, but not in others, so not all TV group owners will benefit to the same degree. He also sees a long-term shift in how political dollars are spent. "While local TV is still the gorilla for political advertising, cable is starting to pull in a larger percentage of political dollars," he said. "We expect broadcast TV remains to capture around 56% of all political advertising in 2004 - - the same level as in 2000 - - but cable is expected to grow to around 3% from 1.6% during the same timeframe. We now believe that in 2006 cable stands to gain more market share, benefiting from more targeted advertising technology."

As for the three downgraded stocks, Jacoby said they have rebounded from their lows and are now near his price targets. So he's reducing growth expectations for the entire TV sector for Q3 to 12% (from 13.6%) and for Q4 to 15.1% (from 16.9%) and lowering his recommendation for the three TV stocks he previously had with "buy" ratings. "We do not believe they represent a compelling buying opportunity at this time," he said of Belo, Hearst-Argyle and LIN.