Nexstar Media Group is the biggest owner of TV stations within the U.S., and it stands to see an enormous revenue boost from the U.S. elections.
The presidential election is just 4 months away, and it may very well be a direct catalyst for this election stock, Nexstar Media Group (NASDAQ:NXST).
Nexstar is the biggest owner of television stations within the U.S. In consequence, its revenue typically jumps during presidential election years as a result of a flood of ad revenue generated from political promoting — from the presidential race, right down to Congressional and native elections.
Let’s take a have a look at why Nexstar is an election stock to placed on your radar.
A record amount can be spent on political ads
The stock market has historically done pretty much during presidential election years. Despite the pandemic, the S&P 500 jumped 16% in 2020, while it rose 10% in 2016 and 13% in 2012. Nonetheless, it fell 38% when the Great Financial Crisis hit in 2008.
This yr, the S&P 500 has gained about 16% and is on pace for one more winning presidential-election yr.
For probably the most part during presidential-election years, the stock market’s performance has more to do with the economy on the time than the race for the White House. Nonetheless, it might also see a bump — or drop — following the election, based on who wins and who controls Congress.
Moreover, there are some cases where politics can have a direct impact on a stock. That is actually the case with Nexstar Media stock.
Nexstar owns greater than 200 TV stations in 116 markets, and it reaches roughly 212 million people. Along with its local stations, it also owns The CW Network, NewsNation, and Antenna TV and has a partial stake within the Food Network, amongst other channels. Nexstar also owns The Hill, a publication that covers politics.
As political ads are the lifeline of political campaigns, Nexstar sees an enormous influx of ad revenue from its TV stations during election years. This is especially true in presidential-election years, when there are more races and more is at stake.
This is particularly true this yr, when a record $10.7 billion is projected to be spent on political ads in 2024 — a 19% increase over the 2020 election.
Nexstar thrives on political ads
Nexstar’s stock price is up by about 3% thus far this yr, trading at $165 per share, but Wall Street analysts anticipate a second-half surge as political ad spending ramps up.
Nexstar stock has a median price goal of $207 per share, which is 25% higher than the present price. Even the low-end estimates amongst analysts call for a 9% jump in Nexstar stock.
Within the fiscal first quarter ended March 31, this election stock had its best first quarter ever with $1.3 billion in revenue. Nonetheless, that was mainly as a result of a 5% spike in distribution revenue, which is income received for letting platforms carry its stations and networks.
Total ad revenue was roughly flat yr over yr at around $512 million. This is principally because most state primaries had no drama and little interest.
Nonetheless, that ought to change within the second, third and fourth quarters, as a heated presidential election and Congressional races take center stage.
“Looking ahead, we remain confident that Nexstar will deliver one other strong yr of monetary results and expect to construct momentum through 2024, given the anticipated record-level of political spending this presidential election cycle,” Nexstar Chairman and CEO Perry Sook said.
As Nexstar president and Chief Operating Officer Michael Biard identified within the first-quarter earnings call, many of the ad spending occurs within the 10 to 12 weeks before election day in November.
A 48% revenue increase in 2020
In the event you have a look at the last presidential-election yr, Nexstar generated $507 million in political ad revenue in 2020, accounting for 11% of its total revenue. The yr earlier, it made just $52 million in political ads, just 1.7% of the entire.
Overall, Nexstar saw a 48% increase in total revenue in 2020, because of the boost from political ads. Will we see the identical form of increase in 2024?
Nexstar stock is dirt low-cost at once, with a P/E of 14 and a forward P/E ratio of just 6. Because the political campaigns heat up, this election stock should too.