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 iHeart Media Inc. (NASDAQ:IHRT) 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 radio tower with a setting sun in the background, symbolizing the power of broadcasting.
iHeart Media Inc. (NASDAQ:IHRT)
Market Cap: $229.76 million
Number of Hedge Fund Holders: 14
iHeart Media Inc. (NASDAQ:IHRT) is a mass media corporation dominant in the radio broadcasting industry. It provides listeners with many music and entertainment options through traditional and digital channels.
The Digital Audio Group is a big segment for the company, with a 31% contribution to the total revenue in just Q2. This also represented a 10% year-over-year improvement in the segment. Within the Digital Audio Group, podcast revenues grew 8%, whereas non-podcast revenues rose 10%.
However, the company’s overall revenue improvement was only 1% year-over-year. The revenue resultantly was $929.09 million, higher than what analysts had anticipated, but almost flat compared to the last year. This 1% revenue growth was driven by political ad mainly, and if that segment had not been considered, the overall year-over-year revenue increase would only be 0.1%. Moreover, the loss per share in Q2 was $6.50.
It is the exclusive audio partner for NBC’s 2024 Summer Olympics coverage. This includes a new podcast and live streaming. Under a recent partnership between iHeartPodcasts, Universal Television, and Wolf Entertainment, “Law & Order: Criminal Justice System” will be distributed by iHeartPodcasts. This is the first-ever investigative true-crime podcast series by Law & Order, premiering on August 22.
The company has a strong broadcast radio foundation, which helped it build the iHeartRadio app, a leading digital radio service, and a live events business. When we see that iHeart Media Inc. (NASDAQ:IHRT) reached 110 million Americans monthly through 3,000+ websites, and has increased its social media presence 7 times, we can tell that the company is positioned for success in the broadcast industry. This is why it makes it to our top broadcasting stocks to buy.
Of 14 hedge fund holders, AQR Capital Management has the largest stake in the company, as of June 30. It has a position of $4,261,605.
Palm Harbour Capital made the following comment about iHeartMedia, Inc. (NASDAQ:IHRT) in its Q1 2023 investor letter:
“The second largest detractor was iHeartMedia, Inc. (NASDAQ:IHRT) (-37.5% -58 bps), the American radio and podcasting company. The company suffered two self-inflicted wounds, which will impact the first quarter. The first, which the company flagged as temporary was a change in sales incentives. Apparently, they changed their sales force behaviour to sell more lower margin products at the expense of higher margin products (where management believed it should have been incremental volumes of lower margin not a switch). The second was their guidance for interest rate expense. The company did not hedge their floating term loan and is suffering from the higher interest rate environment, something you do not want to see in a highly levered company. Their debt maturities are years out, but every quarter that passes where free cashflow is low will make refinancing more difficult. Up until now, the company has been executing well, and their podcast business is growing strongly. Management has also been buying shares and we believe their major shareholder, if allowed by the Federal Trade Commission, is potentially interested in owning the business.”
Overall IHRT ranks 5th on our list of the best broadcasting stocks to buy. While we acknowledge the potential of IHRT 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 IHRT 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.
