We came across a bullish thesis on Townsquare Media, Inc. (TSQ) on Substack by Investing 501. In this article, we will summarize the bulls’ thesis on TSQ. Townsquare Media, Inc. (TSQ)’s share was trading at $7.95 as of April 1st. TSQ’s forward P/E was 9.35 according to Yahoo Finance.
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Townsquare Media (TSQ) presents a compelling investment opportunity as it transitions into a digital-first media company while maintaining a stable and cash-generative radio business. The company operates 344 radio stations across 74 markets, primarily outside the Top 50, reducing competition from major digital players. This radio segment, which contributes 45% of revenue, has remained resilient over the past five years, providing a consistent cash flow source to fund Townsquare’s growing digital operations. The real growth engine lies in its digital business, which now accounts for 55% of total revenue. Townsquare Ignite, the programmatic digital advertising platform, generates 35% of revenue with high profit margins, leveraging the company’s extensive local and national digital presence. Townsquare Interactive, a subscription-based digital marketing service, contributes 17% of revenue and has started to recover from subscriber losses in recent years, marking its first year-over-year revenue growth in Q4 2024.
Management is highly aligned with shareholders, owning 29% of outstanding shares, and has executed strong capital allocation strategies. Since 2021, Townsquare has aggressively repurchased shares, reducing its count by 16.2 million at an average price of $7.19, including buybacks from Oaktree Capital and Madison Square Garden. The company has also repurchased $81 million in debt while refinancing its 2026 maturities with a new Term Loan B and a revolving credit facility, extending obligations to 2030. While this refinancing increased annual interest expenses by $9 million, it significantly improved near-term liquidity and removed debt-related risks.
Townsquare’s digital transformation is accelerating, with digital revenue growing at a 13% CAGR since 2014 and projected to reach 75-80% of total revenue and profit in the coming years. Townsquare Ignite continues to see high-single-digit growth, supported by its robust network of 400 local news and entertainment websites and proprietary programmatic advertising capabilities. Meanwhile, Townsquare Interactive, despite past challenges, is expected to add 3,000+ net new subscribers annually, contributing meaningful incremental revenue and operating profit. While competition from streaming services and economic downturns pose risks, the company’s strong local focus and diversified revenue streams provide a competitive moat.
A potential shift in FCC regulations could create opportunities for acquisitions or divestitures in the radio segment, adding optionality to the investment thesis. The company’s valuation remains highly attractive, with a simple sum-of-the-parts (SOTP) analysis suggesting a price target above $22.50 per share. Even at a 50% discount to this valuation, investors could see a significant upside. Townsquare’s stock has historically traded above $12, reinforcing strong support levels. With stable EBITDA, a well-covered 10% dividend yield, and a discounted valuation, investors are well-positioned for substantial gains, effectively being “paid to wait” for a re-rating driven by digital growth or capital reallocation.
Townsquare Media, Inc. (TSQ) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 8 hedge fund portfolios held TSQ at the end of the fourth quarter which was 7 in the previous quarter. While we acknowledge the risk and potential of TSQ 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 TSQ 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.