Here's Why You Should Offload TEGNA (TGNA) Stock For Now

On Aug 22, Virginia-based, publicly traded broadcast and digital media company, TEGNA Inc. (NYSE:TGNA) was downgraded to Zacks Rank #4 (Sell).

TEGNA’s price performance has been dull for the last three months. The stock price of the company decreased 47% against the industry’s gain of 3.6%.

Notably, the broadcast TV industry is categorized as an intensely competitive one that include major competitors like CBS Corp. (NYSE:CBS) , Gray Television Inc. (NYSE:GTN) and Entercom Communications Corp. (ETM) among others.

Moreover, the media and entertainment industry is one of the rapidly changing areas in the economy. Massive technical changes in content creation, aggregation, and distribution platforms have rendered the traditional business model unprofitable.

Such technological changes and their latest upgrades add to the company’s programming costs and expenses, which are likely to affect the bottom line. In the second quarter of 2017, operating expenses were $339.29 million, up 6.9% year over year.

Additionally, soft advertising market remains a headwind for the company, going forward.

Recently, TEGNA completed the sale of its web portal CareerBuilder, to an investor group led by Apollo Global Management and Ontario Teachers’ Pension Plan Board. However, it will still remain an ongoing partner of CareerBuilder, while reducing its previous 53% controlling interest to 12.5%, on a fully-diluted basis. The company’s gross proceeds from the sale was around $250 million, which will be used to clear off existing debt as well as for other general corporate purposes.

Nevertheless, being more focused on content creation rather than TV broadcasting, the media division shelters the company from the prevailing cord-cutting threats in the pay-TV industry.

On Jun 1, 2017, the company completed the spin-off of Cars.com, creating two publicly traded companies, namely TEGNA, an innovative media company with the largest broadcast group among major network affiliates in the top 25 markets and Cars.com, a leading digital automotive marketplace.

Stock to Consider

Investors interested in the broader Consumer Discretionary sector may also consider Adidas (DE:ADSGN) AG (OTC:ADDYY) currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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