Broadcast Stocks Seen Likely To Bounce Back

After triple digit growth in 2013, investors are voicing “anger, confusion and frustration” with the 20% drop in the value of broadcast stocks that’s occurred so far this year, according to a leading industry analyst.

Speaking at the TVB Forward conference in New York, Wells Fargo’s Marci Ryvicker says a range of factors — a decline in national advertising, regulatory uncertainties and concerns about retransmission agreements, mergers and the spectrum auction among them — likely contributed to the drop in stock prices, which occurred despite the S&P being up by 8% during the same period.

“That spooked investors” who started off 2014 “really excited” about the prospects of Olympics, World Cup and political advertising, she said.

That initial optimism also build on the their success in 2013, when broadcast stocks rose by 280%, outperforming the S&P, which was up 30% — likely boosted by investors being “clearly excited” about group consolidations and “pretty comfortable with the thought that retrans and reverse compensation would lead to a 50-50 split, Ryvicker said.

She said she expects investor confidence to return now that regulatory issues — whether the FCC would break up station groups, for example — have been resolved, and political ad dollars are expected to start coming in (although possibly “later and lighter” than usual).

She also said she expects to see “consistent growth” in retrans fees, despite predictions that local broadcasters will end up getting just 10% of that money, with the other 90% going to the networks. She also says she is “neutral” on the FCC’s spectrum auction, saying there’s no certainty on how it will affect business.

“We have a lot more certainty. We know what the stations can and can’t do,” she said. “I think the industry is going to be fine.”

That could change, however. “I am going to be really nervous going into the fourth quarter and not seeing strength,” she says.

Other industry watchers who participated on a panel discussion with Ryvicker agreed.

They said they believe broadcasting will continue to thrive, despite recent data showing a 4%-5% decline in viewers and acceleration of advertising dollars going to digital platforms.

“It still dwarfs everything to a substantial degree,” said Brian Wieser, a Pivotal Research Group senior analyst. “For marketers who need tonnage of reach and frequency … nothing remotely touches it.”

But Todd Juenger, a Sandford Bernstein senior analyst, said he doesn’t see online advertising as a threat to broadcasting, noting that the money being spent on the media is “perfectly proportionate” to their reach.

“The question in the future, then, is it going to get worse? Is television going to become what happened to the newspapers?” he said. “The good news, in my opinion, is the answer is no.”

Read other stories from the TVB Forward conference here.