We came across a bullish thesis on Nexstar Media Group, Inc. (NXST) on Substack by Value Don’t Lie. In this article, we will summarize the bulls’ thesis on NXST. Nexstar Media Group, Inc. (NXST)’s share was trading at $178.76 as of April 1st. NXST’s trailing and forward P/E were 8.35 and 11.52 respectively according to Yahoo Finance.
A television broadcaster preparing a new Spanish-language program for its viewers.
Nexstar Media Group (NXST) is the largest local TV broadcaster in the U.S., with 200 stations across 40 states, a 77% stake in The CW, a 33% stake in the Food Network, and a digital footprint reaching 103 million monthly visitors. The business operates through two primary revenue streams: distribution fees from cable, satellite, and streaming aggregators, and advertising revenue from TV, digital platforms, and major events. While the traditional cable bundle is in decline, streaming carriage offers a potential offset, though the long-term transition remains uncertain.
Despite concerns over linear TV’s secular decline, NXST has demonstrated strong financial performance. The company generates stable free cash flow (FCF) of around $1 billion annually, with minimal capex requirements. Since 2016, it has repurchased 35% of its outstanding shares while also reducing debt, balancing aggressive capital returns with financial prudence. With leverage trending downward and a disciplined capital allocation strategy, NXST’s buyback program remains a powerful tool to drive shareholder value, assuming no major shifts in its industry dynamics.
Regulatory changes present potential upside, particularly with incoming FCC leadership under Brendan Carr. If ownership rules are relaxed, NXST could pursue further acquisitions, leveraging cost synergies to enhance profitability. Historically, the company has executed transformative M&A, most notably with Media General in 2017 and Tribune in 2019. However, regulatory constraints have curtailed further dealmaking, forcing NXST to focus on organic growth and capital returns.
At current levels, NXST trades at just 5.4x FCF and 11.8x EV/FCF, reflecting the market’s skepticism toward legacy broadcasters. Cable TV subscribers have declined from 105 million in 2010 to 66 million today, with virtual subscribers only partially offsetting losses. If subscriber declines stabilize and NXST maintains an average of $850 million in annual FCF over the next five years, it could repurchase another 35% of its shares, driving FCF per share to $43. A modest 6x multiple would imply a valuation of $258 per share, representing a ~10% IRR.
The primary risk remains the long-term trajectory of the broadcast model. If revenue declines accelerate, fixed costs could pressure margins. Additionally, NXST may slow buybacks to preserve cash for opportunistic acquisitions. However, the current valuation compensates for these risks, with optionality for regulatory-driven M&A acting as a catalyst. Investors are essentially betting that NXST’s capital allocation and industry positioning will generate strong returns, even amid an evolving media landscape.
Nexstar Media Group, Inc. (NXST) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held NXST at the end of the fourth quarter which was 27 in the previous quarter. While we acknowledge the risk and potential of NXST as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NXST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.