We recently compiled a list of the 10 Best Broadcasting Stocks to Buy. In this article, we are going to take a look at where Gray Television, Inc. (NYSE:GTN) stands against the other broadcasting stocks.
Technological advancements have transformed the global broadcasting market, just as much as any other industry. Innovation has elevated the broadcasting experience for an average viewer, offering a wide range of rich and high-quality content. Hence, in 2022, we had a global broadcasting market valued at $343.35 billion, as reported by Grand View Research. By 2030, this number could reach $448.34 billion, growing at a compound annual growth rate of 3.9% through the forecast.
As machine learning and AI help gain companies a competitive edge, AI-powered solutions are being used in broadcasting to enhance video quality, streamline live broadcasts, and personalize user experiences.
For instance, Korbyt, a workplace experience platform, recently launched its Machine Learning Broadcast solution, which uses an AI-powered camera to adjust content based on viewer engagement. In essence, it uses smart technology to show different content on screens based on who’s watching and how they react. So, if people are spending a lot of time looking at a certain ad, Korbyt might show that ad more often. It can even optimize recommendations according to people’s preferences and create new content for them.
The global advertising and broadcast industries are also close and benefit from one another. One impact currently is the surge in political advertising spending on broadcasting platforms due to the US election campaign. As the demand for advertising space across various platforms rises, advertising rates for broadcasting companies with increase and boost their revenues.
Forbes reported that the total spending reached $8.5 billion across TV, radio, and digital media in the last election cycle. This was 30% higher than the $6.7 billion projected earlier that year, and 108% more than spending in 2017-2018, which was a record at that time. GroupM projects a record-breaking $15.9 billion investment in political ad spending for the end of 2024.
As campaigns intensify their advertising efforts, especially in the weeks preceding the election, broadcast companies can anticipate a significant rise in revenue, given the heightened demand for airtime to reach voters.
According to Emarketer, 45% of the total digital political ad spending will be seen on CTV (connected TV). As major companies in the networking, entertainment, and streaming industry continue their ban on political content, the major benefit of this spending will go to broadcasting companies.
Goldman Sachs’ Jonny Fine, the global head of investment grade debt, in a recent discussion, mentioned that the US election will likely be a big market event. He says that the outcome could most definitely differ depending on which candidate emerges victorious, but investors need to be prepared for the potential market volatility nonetheless. However, when it comes to realizing short-term gains from elections, the 2019-2020 US election cycle advertising spending validates the projections for this year.
The Business Research Company reports that North America dominated the broadcast market in 2023, but Asia-Pacific is expected to grow the fastest in the coming years. With a promising growth potential, this industry can reward those who watch it closely and observe its dynamics. In this context, we are here with a list of the 10 best broadcasting stocks to buy.
Methodology
To compile our list, we sifted through ETFs, stock screeners and online rankings to compile a list of 15 best broadcasting stocks to buy. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A satellite dish with a view to the night sky, preparing to receive transmissions.
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.”
Overall GTN ranks 3rd on our list of the best broadcasting stocks to buy. While we acknowledge the potential of GTN as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GTN 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 is originally published at Insider Monkey.