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Analyst Downgrades TV Station Groups’ Ratings

Sep 14, 2004  •  Post A Comment

Bank of America Securities analyst Jonathan Jacoby on Tuesday downgraded the stocks of Belo, Hearst-Argyle Television and LIN TV Corp. to a “neutral” rating from a “buy” rating. Mr. Jacoby also lowered his stock-price targets for Nexstar Broadcasting to $9.50 a share from $11 a share, and for LIN to $23 a share from $24.

Central to Mr. Jacoby’s assessment is his belief that Belo, Hearst-Argyle and LIN stocks are fully valued. Any benefit from a surge in political advertising spending has already been priced into the stock, he said, adding that it’s even possible that political spending in 2004 will fall short for some operators if their stations aren’t located in the 18 presidential election swing states. On top of that, Mr. Jacoby said the core advertising business is not as robust as Wall Street would have liked.

In addition, each station group is facing its own challenges. At Belo, the fallout from the circulation overstatement at its flagship newspaper The Dallas Morning News remains an open question and likely will affect the overall company’s revenue and profitability, Mr. Jacoby said.

With 10.5 percent of Hearst-Argyle’s revenue coming from political advertising in 2004, the company will face a difficult comparison in 2005, Mr. Jacoby said. Another challenge could be the station group’s higher concentration of NBC stations, which could suffer as a result of modest starts to the second installment of “The Apprentice,” “Joey” and “Father of the Pride.”

Meanwhile, Mr. Jacoby said LIN faces risks with its new growth initiatives, including a programming partnership with MTV for a Puerto Rican television station.