Not everyone is downgrading


Our stories from Wall Street have, for some time now, been almost exclusively about downgrades as far as analysts covering radio stocks are concerned. Most recently, Goldman Sachs analyst Mark Wienkes lowered his targets for Cox Radio, Entercom and Entravision. But in the past few days Jim Boyle at CL King has actually upgraded a couple of radio stocks. Not that he’s become a bull, but he isn’t writing off the sector.

Radio stock prices have fallen so much recently that Boyle figures all of the negatives are now “baked in” to the trading prices of Cox Radio and Emmis. He’d downgraded both to “underperform” on September 22nd. Since then Cox’s stock price has fallen 38% and Emmis’ 48%. Boyle isn’t yet calling a buy opportunity, but he has upgraded both to “neutral.”

Emmis, he said, is now trading at a noticeable discount to its peers. However, he also notes that the company faces stiff economic headwinds, is highly leveraged and faces revenue disruption in its large markets due to the deployment of Arbitron’s Portable People Meter. But should things go from bad to worse, Boyle figures Emmis has four “laggard radio stations” in big markets that it could sell for more than its entire debt load.

Boyle also worries about PPM coming to Atlanta in December, since that market accounts for a quarter of Cox Radio’s revenue. “At least in this credit squeeze CXR has less debt leverage than its peers,” he notes on the up side. Cox used to trade at a premium to other radio stocks, but now trades at a discount. Boyle has reduced his financial projections for Cox for this year and next, but he thinks the beaten down stock price now reflects the “weakness in radio and the economy,” so he has bumped his rating on the stock back up to “neutral.”