Ahead of iHeartMedia’s first quarterly earnings call in 20 months, analysts are optimistic about the reorganized company’s future prospects. In a Barron’s story headlined “iHeartMedia Stock Is Poised to Climb After Bankruptcy,” several analysts have priced the company’s stock well above where it has been trading since iHeart returned to the public markets July 18.
“The radio-station giant exited from Chapter 11 on May 1 looking slimmer and fitter,” Barron’s says in the story. “Its debt was cut to $5.8 billion from $16 billion before bankruptcy, and it is well-positioned in the fast-growing and competitive digital streaming and podcasting businesses.”
“It’s the largest radio company in the country and has a strong digital presence,” Hamed Khorsand, an analyst with BWS Financial in Woodland Hills, CA, says in the Barron's story. “Now that the company is in better financial condition, it will be able to better invest in the business and grow.” Khorsand has a $30 price target on shares of “IHRT,” which trade on the NASDAQ Global Select Market.
J.P. Morgan analyst Sebastiano Petti initiated coverage of iHeart with an “overweight” rating and a $21 price target, citing a “strong and growing digital segment with its iHeartRadio app and podcasting business.”
After the Barron’s story was published Friday night, shares of “IHRT” jumped 3% in Monday trading to close at $13.25, up 38 cents. The price soared as high as $14.68 Monday morning.
The stock “looks appealing” as creditors who received shares in bankruptcy sell their holdings, Barron’s says. The stock trades for just seven times projected 2019 earnings of $1.73 a share, and its 20% free-cash flow yield is high.
The piece discloses some new info on the company’s finances. Its market value is currently around $2 billion and its largest stockholder is bond giant Pimco, which owns 30%, followed by Franklin Templeton Investments at 8%, and Liberty Media at 4.8%. While Liberty Media made an unsuccessful $1.16 billion bid to acquire a 40% stake in iHeartMedia in June 2018, Barron’s suggests Liberty seems content with a passive stake in iHeart for now.
Third party data show iHeart’s engagement is strong at 30 minutes per day, versus 25 minutes for Google and 18 minutes for Facebook. Broadcast radio accounts for 63% of iHeart’s revenue. And while Barron’s contends that its broadcast stations have limited growth potential, “the outlook is better” for its live events, digital streaming and podcasting businesses where it ranks as the nation’s No. 1 commercial podcaster. According to the IAB/PwC Podcast Advertising Revenue Study released in early June, podcast ad market revenue will surpass $1 billion by 2021, double that of last year.
Zacks Investment Research is also bullish on iHeart, especially its streaming audio platform. "If it is able to continue to gain market share, this segment could propel them back into profitable growth," Zacks predicted in an outlook piece written shortly after the radio giant emerged from Chapter 11.
The company will hold its first earnings call on Thursday since filing for Chapter 11 in March 2018.