3 radio and TV shows to watch in a thriving industry

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The Zacks Radio and Television Broadcasting The industry has benefited from the growing demand for streaming content amid rising cord-cutting rates. Industry participants like Discovery of Warner Bros. WDB, Fox Company FOXA and gray television GTN benefits from a huge spike in digital content consumption. Diverse, original, regional, short and small-screen (smartphones and tablets) content offerings, improved internet speed and penetration, and technological advancements benefit industry players. As monetization and ad spend revenue continues to be subdued, profit protection and cash management with greater technology integration have gained strategic importance and should help these companies improve revenue. short term business.

Description of the industry

Zacks Broadcast’s radio and television industry includes businesses providing entertainment, sports, news, non-fiction and music content across television, radio and digital media platforms. These companies mainly derive their income from the sale of television and radio programmes, advertising space and subscriptions. Notably, these industry players are increasing their spending on research and development as well as sales and marketing in order to stay afloat in an era of technological advancements with increased demand for VR and Internet radio among the public. The industry is expected to remain focused on subsistence at current levels with a renewed emphasis on flexibility, which would accelerate the shift to a variable cost model and reduce fixed costs.

4 Broadcast and TV Industry Trends to Watch

Changing consumer preferences are a key enabler: To adapt to changes in the sector, companies are offering various content for over-the-top (OTT) services in addition to linear television. Additionally, they are adding OTT services to their content portfolios. The availability of streaming services on a wide range of platforms helps these services easily reach global audiences. It also helps them expand their international user base, which in turn attracts advertisers to their platforms, thereby increasing ad revenue. Additionally, using services to help advertisers measure their ROI and improve their use cases should benefit both advertisers and industry players. Additionally, major leagues and events such as the NFL, NHL, Olympics, European Games, EPL, and elections attract significant advertising dollars. The recent resumption of live sporting events after delays and cancellations over the past year is expected to boost advertiser demand.

Increase in content demand for digital viewing aids: Many industry players who launch their own OTT services or acquire other OTT services rely on user knowledge to deliver the right content. The increase in digital visualization is making consumer data readily available to businesses, enabling them to apply artificial intelligence and machine learning techniques to create/achieve targeted content. The move not only boosts user engagement, but also allows industry players to raise prices for their services when the time is right without fear of losing subscribers.

The coronavirus is hurting production and advertising demand: Industry players bear the brunt of coronavirus-induced macroeconomic woes. Advertising is a major source of revenue for this industry, which has been hit hard by the coronavirus. The recovery in advertising demand, which is still weak, and the reduction in expenses should hurt sales in the short term. Additionally, industry players face fierce competition from tech and social media companies for advertising dollars. This has been a major impediment to growth.

Skinny low-cost bundles hurt revenue: The rise in cord cutting has forced industry players to come up with “skinny bundles”. These services, available via the Internet, often contain fewer channels than a traditional subscription and are therefore less expensive. The move is in line with changing consumer viewing dynamics, as growing internet penetration and advances in mobile, video and wireless technologies have boosted small-screen viewing. Alternative services are expected to keep users glued to their platforms, increasing the need to produce more content. However, meager low-cost packages are likely to hinder revenue growth.

Zacks’ Industry Rankings Indicate Bright Prospects

The Zacks Broadcast radio and television industry is housed within the Zacks ensemble Consumer Discretionary sector. It carries a Zacks Industry Ranking of #92, which places it in the top 37% of over 250 Zacks industries.

That of the group Zacks Industry Ranking, which is essentially the average of the Zacks ranking of all member stocks, indicates an encouraging near-term outlook. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the top 50% of industries ranked by Zacks is the result of a positive earnings outlook for the constituent companies overall. Looking at revisions to overall earnings estimates, it appears analysts are optimistic about the earnings growth potential of this group.

Before outlining a few stocks you might consider for your portfolio, let’s take a look at recent stock market performance and the industry valuation picture.

The industry is lagging the sector and the S&P 500

The radio and television industry Zacks Broadcast has underperformed the broader consumer discretionary sector Zacks and the S&P 500 index over the past year.

The industry fell 57.8% during this period, compared to the 12.8% drop in the S&P 500 and the 42.4% drop in the broader sector.

Year-over-year price performance

Current industry assessment

Based on 12-month EV/EBITDA (enterprise value/earnings before interest, amortization and amortization), which is a multiple commonly used to value radio and television stocks, the industry is currently trading at 16.52X against the S&P 500. 12.19X and 9.17X from the sector.

Over the past five years, the industry has traded as high as 41.9X and as low as 16.13X, recording a median of 30.23X, as seen in the chart below.

EV/EBITDA ratio (TTM)

3 radio and TV shows to watch

Gray TV: Based in Atlanta, Georgia, this company’s local stations Zacks Rank #1 (Strong Buy) are popular among buyers of political ads. Notably, after the acquisition of Raycom, Gray reached nearly 36% of the US population in 113 markets, operating over 150 Big Four-affiliated stations. You can see the full list of today’s Zacks #1 Rank stocks here.

In the first quarter of 2022, the company’s core advertising revenue increased 40% year-over-year and retransmission consent revenue increased 59% year-over-year. The company also witnessed a surge in political advertising revenue, which grew 189% year-over-year in the first quarter.

Zacks consensus estimate for 2022 earnings has been flat at $5.27 per share over the past 60 days. Gray Television shares are down 16.2% year-to-date.

Pricing and Consensus: GTN

Fox: This New York-based company is riding the growing demand for live programming. Robust adoption of Fox News and Fox Business Network (FBN) should boost the user base in the near term. This Zacks No. 3 (Hold) company generates much of the ad revenue from live programming, which is relatively immune to rapidly intensifying competition from subscription video-on-demand services.

Additionally, the recovery in ad spend in the local ad market, impacted by the coronavirus outbreak, is a major plus for Fox. Additionally, increased affiliate fee revenue is expected to boost Fox’s revenue.

Zacks’ consensus estimate for Fox’s fiscal 2022 earnings fell 0.7% to $2.81 per share over the past 60 days. The title is down 12.9% since the start of the year.

Pricing and Consensus: FOXA

Discovery of Warner Bros. : The expansion of direct-to-consumer offerings from this Zacks #3 ranked company is driving revenue growth.

Expanding sports coverage based on partnerships with PGA TOUR, Tiger Woods and Olympics is a major growth driver for Discovery. In addition, the recovery in advertising spending, mainly in international markets, is a major positive element.

Markedly, the stock is down 43% since the start of the year. Notably, Zacks’ consensus estimate for its 2022 earnings has been flat at $1.51 per share over the past 30 days.

Pricing and Consensus: DISCA

Zacks names ‘only one best choice for doubling up’

From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.

It’s a little-known chemical company that’s up 65% year-on-year, but still very cheap. With relentless demand, rising earnings estimates for 2022 and $1.5 billion for stock buybacks, retail investors could step in at any time.

This company could rival or surpass other recent Zacks stocks which are expected to double, such as Boston Beer Company which jumped +143.0% in just over 9 months and NVIDIA which jumped +175.9% in one. year.

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Warner Bros. Discovery, Inc. (WBD): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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