On Friday, Benchmark analyst lowered the price target for Gray Television (NYSE:GTN) shares to $11 from $13, while still recommending a Buy for the stock.
The revision comes as the company faces challenges, including disappointing retransmission revenue guidance and a reduction in overall revenue forecasts. This adjustment aims to account for potential political advertising displacement.
Gray Television, which has seen its shares approach 12-month lows, has opted not to provide specific political revenue expectations, contrary to other companies in the sector. This decision is attributed to the wide range of possible political revenue outcomes. Despite a projected 5% decrease in 2024 EBITDA, the company's equity experienced a sell-off of over 20%.
However, Gray Television's recently refinanced debt continues to trade close to its full value, indicating bondholders have a more optimistic view of the company's cash flow compared to equity investors.
The analyst believes that the current disparity between the equity and debt perspectives may be resolved in the coming two quarters. This resolution is anticipated as Gray Television provides actual political revenue and initial retransmission revenue guidance for 2025. Additionally, the company is working to reduce retransmission consent fees with major networks such as ABC, CBS, and FOX over the next 18 months.
Despite not factoring in any additional rental revenue for Assembly, the analyst suggests that Gray Television could be on a path to improved cash flow growth.
This potential is seen as a positive for the company's leverage situation, especially if it continues to proactively repurchase its debt at a discount. The company's strategy of managing its debt and cash flow is expected to contribute to a stronger financial position in the near future.
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