Ryvicker: What’s Not To Like About Nexstar

Buy! Buy! Buy!, says Well Fargo analyst Marci Ryvicker says after spending a day and half with Nexstar Media CEO Perry Sook and CFO Tom Carter this week. “Nexstar is our top pick in broadcast.”

“We could not be more bullish,” she says in a note to clients. “In our view, this mgmt. team is doing everything right — in terms of capital allocation, M&A strategy, core operations, you name it.”

The note reaffirms Wells Fargo “Outperform” rating for the station group with a “conservative” target of $85 per share. The stock has been trading around $63 after hitting a high of $72 in March.

Nexstar renewal of its affiliation deal with Fox announced earlier this week should not be shrugged off, even though it is only for three years, the note says. That Nexstar was able to wrap the recently acquired Media General stations into the deal was “a very positive development.”

Plus, the note says, the related “OTT master agreement” will allow Nexstar to distribute its Fox affiliate on streaming services like Sling TV and PlayStation Vue. That removes “a pretty large” overhang as the terms of such deals can be as good as, if not better than, the retrans deals with conventional MVPDs.

The note says that the Nexstar executives agreed that Nexstar’s rumored acquisition of Tegna did not make financial sense.

“We do think the co. will look to do accretive tuck-ins (esp. post relaxation of the Local Ownership Rules, which should start in Sept.) and could participate in whatever divestitures happen to result from the [Sinclair-Tribune] deal – but only at the right price.”

Nexstar’s spot revenue is “pretty much as management had expected with Q2 showing slight improvement as the quarter progressed. We also did not sense any trepidation when it came to auto ad trends.”

The Nexstar execs were the second management team (Scripps’ was the first) to express enthusiasm for political advertising late this year and next.

“In fact, it already sounds like political dollars are flowing in at a greater pace than expected. We’ve been asked when the market will start paying attention. Our sense is that people will care after this next round of earnings. And don’t forget that Nexstar was one of the few companies that did not miss its political guide for 2016.”