Steven Cahall, an analyst from Wells Fargo, reiterated the Sell rating on Gray Television (GTN – Research Report). The associated price target is $5.50.
Steven Cahall has given his Sell rating due to a combination of factors affecting Gray Television’s financial outlook. The analyst cites concerns around the company’s declining retransmission revenues and the challenges it faces in deleveraging. Cahall points to a weaker than expected guidance for retransmission revenue, which is seen declining year-over-year despite a significant portion of subscriber contracts being up for renewal. This decline is attributed to accelerated subscriber losses, slower retransmission rate increases, and dilution from virtual MVPDs. Additionally, the company’s guidance for the fiscal year suggests continued pressure on net retransmission revenue, exacerbating the financial risks.
Moreover, Cahall notes Gray Television’s increased leverage as a critical concern, given the insufficient free cash flow (FCF) projections that could hinder the company’s ability to reduce debt effectively. The revised FCF estimates for FY24 and FY25 have been lowered, reflecting changes in retransmission revenue, investments into Assembly, and political advertising expectations. Despite some strategic investments in sports content and potential new advertising revenue, these factors do not sufficiently counterbalance the heightened equity risk due to negative net retransmission growth paired with high leverage. Consequently, the price target has been reduced, and the P/FCF multiple has been lowered, leading to the reaffirmation of the Underweight rating.
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Gray Television (GTN) Company Description:
Gray Television, Inc. is a television broadcasting company, which engages in owning and operating television stations and digital assets in markets throughout the United States. It operates through the following segments: Broadcasting, and Production Companies. The Broadcasting segment operates television stations located across local markets in the United States. The Production Companies segment includes the production of television and event content. The company was founded in January 1897 and is headquartered in Atlanta, GA.
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