3. Gray Television, Inc. (NYSE:GTN)
Market Cap: $518.80 million
Number of Hedge Fund Holders: 22
Gray Television, Inc. (NYSE:GTN) is a broadcasting company operating in around 180 stations across the US, focusing on providing local news, entertainment, and quality journalism.
It has signed its first long-term studio lease with a major studio company. The lease is for multiple stages within Assembly Studios and will support a new episodic television drama for one of the Big Four broadcast networks.
In Q2, core advertising revenue was below guidance, 1.5% lower compared to 2023. This difference was partially due to the absence of NCAA final four games, which were broadcast in 2023 but not in 2024. However, the political advertising revenue surpassed the previous Presidential election year. These shifts resulted in a revenue of $825.00 million for Q2, which despite being lower than street estimates, projected a 1.6% year-over-year increase. The earnings per share were $0.09.
Still, Q3 projections are not very high because growth will mostly come from the Olympics advertising revenue alone. The company’s 56 NBC affiliates will generate approximately $19 million.
The company announced a live broadcast of the Harlem Globetrotters game and launched new networks in Ohio and South Carolina. It also announced that unions have ratified new collective bargaining agreements for workers in the film and television production industry at the Assembly. It has comprehensive coverage plans for the 2024 Democratic National Convention, carried on Gray’s local affiliates and Local News Live.
In just August, Gray Television, Inc. (NYSE:GTN) received 8 National Edward R. Murrow awards for excellence in journalism. Such awards highlight the company’s commitment to quality journalism and its impact on local communities, making this one of the best broadcasting stocks to buy.
22 hedge fund holders held long positions this company. The largest stake is held by Darsana Capital Partners with a value of $21,278,728, as of June 30.
Miller Value Deep Value Strategy stated the following regarding Gray Television, Inc. (NYSE:GTN) in its Q2 2024 investor letter:
“Our two largest detractors during the quarter were Nabors Industries (NBR) and Gray Television, Inc. (NYSE:GTN), whose share prices were down 17% and 16% respectively during the quarter. We think both company’s share prices are at deep discounts to their long-term fundamental value; we have recently increased both holdings.
Gray Television remained under pressure during Q2, with ongoing marketplace concerns on the company debt leverage. Gray has limited maturities over the next 2 years and recently announced an opportunistic debt repurchase program. After a slow start to political advertising due to weaker than expected primaries, we expect to see a nice ramp in political advertising in the back half of the year. Gray’s strong local TV stations, #1 and/or #2 in 89% of their markets, has the company well positioned to achieve $500-700M in high margin political advertising in 2024. In addition, Gray has been outpacing peers in growing their core business over the past couple of years and still appear to be in the early innings of an improvement cycle. Management has recently retrained their salesforce with a greater focus on expanding their high margin digital market share over the next couple of years. In addition, ATSC 3.0 (industry new IP standard), provides opportunity for Gray to stream more content and capture new high margin digital revenue streams overtime. We see the potential for $2.5B of free cash flow generation over the next 5 years that could allow the company to rapidly de-lever their balance sheet and accrue value to the equity holder. With a greater than 80% earnings and free cash flow yield, and an attractive 6.2% dividend yield, we believe patient investors have potential to be rewarded over the coming years.”
