Interesting opinion on IHrt stock value

[Deleted User]

I came across this today, IHrt has been slashing positions since Thursday, something we are getting used to on a regular basis....

But apparently someone at the publication Barons feels IHrt is tanking in a huge way, and the stock price is in free fall

Interesting read.

IHeartMedia Stock Tumbles as Morgan Stanley Turns Cautious on Ad Outlook

Analyst Benjamin Swinburne cut his rating on the company to Underweight from Equal Weight, with a new price target of $11, down from $25.

www.barrons.com

There’s trouble coming in the advertising market, and that is not good news for investors in iHeartMedia IHRT –10.85% , the largest U.S. operator of radio stations.


IHeart shares (ticker: IHRT) are getting clobbered on Friday after Morgan Stanley media analyst Benjamin Swinburne cut his rating on the company to Underweight from Equal Weight, with a new price target of $11, down from $25. IHeart stock was down 12.8%, at $9.57, in recent trading. The S&P 500 SPX –2.91% was down 2.8%.


For the year, iHeart shares are down 55%.

Swinburne says a possible recession and the company’s highly leveraged business—the company has more than $5 billion in net debt, with a market cap of just $1.5 billion—creates “outsized risk to the equity.” He also sees the company’s core broadcast radio business “as structurally challenged by shifting consumer listening habits.” And he notes that while iHeart’s digital audio business is growing impressively, it has lower margins than the core broadcast business.

MODERATOR NOTE; Post exceeded fair usage so the core statements were preserved.

 

[TheBigA]

Keep in mind the stock price has nothing to do with local market staffing. The stock price is a reflection of investment confidence in the potential for overall corporate growth. The Boston staffing is based on the local revenue. A lot of the digital discussed in this article is national, not local. So growth in digital doesn't necessarily mean growth in the local budget, unless there is a lot of local digital creation. If you work in a local market, it behooves you to be part of local digital. It's very possible to see some markets lose staff, while others are growing. It depends on the market. So it's complicated.

 

[CTListener]

That is way too much lifted directly from the Barron's article. In fact, the poster has copied and pasted the whole thing. That could get this website in trouble.

 

[Wimmmex]

Keep in mind the stock price has nothing to do with local market staffing.

Ummmmm...I don't know if that's 100% true. It's been a general given that when a company wants to stop a stock from sagging, they announce layoffs...before they even know who and where.

Company ABC announce 6,000 layoffs....stock price goes up (at least temporarily).

I am always amazed when large companies announce a number, and have no idea what and where to cut (thats to be determined after the fact)...it's just a number to support the stock price.

Why do layoffs increase the stock price?

 

[TheBigA]

Ummmmm...I don't know if that's 100% true. It's been a general given that when a company wants to stop a stock from sagging, they announce layoffs...before they even know who and where.

Did the company announce layoffs in this case, or was it reported internally? Do you have a press release?

iHeart is a very decentralized company. Station budgets are regional and local, with market managers and regional VPs making staffing decisions.

 

[CTListener]

Ummmmm...I don't know if that's 100% true. It's been a general given that when a company wants to stop a stock from sagging, they announce layoffs...before they even know who and where.

Company ABC announce 6,000 layoffs....stock price goes up (at least temporarily).

I am always amazed when large companies announce a number, and have no idea what and where to cut (thats to be determined after the fact)...it's just a number to support the stock price.

Why do layoffs increase the stock price?

Because investors and their advisors always believe that a company has fat to trim. Layoffs make companies run "leaner and meaner." Music to the ears of those who aren't actually working for the company and treating it as a piece in a board game.

 

[PTBoardOp94]

Audacy stock is trading in sympathy with iHeart, setting a new 52 week low yesterday and also down about 50% YTD.

In Audacy's case, they haven't made money in 2020 or 2021, and will only do so this year if there is significant revenue growth, faster than expense growth.

 

[PTBoardOp94]

iHeart is a very decentralized company. Station budgets are regional and local, with market managers and regional VPs making staffing decisions.

That's obviously false, or there wouldn't be national layoffs every year or two for the last 20.

 

[TheBigA]

That's obviously false, or there wouldn't be national layoffs every year or two for the last 20.

These aren't "national layoffs." They're all targeted to local markets. The thing that's national is they make national news. But do you have a press release from the company with a quote from Pittman announcing layoffs that are aimed at boosting the stock price? That's what I'm talking about.

iHeart was a private company, with no public stock, for most of the past 15 years. This current stock was issued after the company emerged from bankruptcy a couple years ago. The fact of the matter is that none of the layoffs when the company was private did anything to address the $20 billion debt that was dragging down the company. That debt remained unchanged during the length of the term.

 

[TheBigA]

Audacy stock is trading in sympathy with iHeart, setting a new 52 week low yesterday and also down about 50% YTD.

There is a weakness in the advertising market right now. Perhaps it's connected to the inflation story. Inflation is also hurting operating budgets because everything costs more, including utilities and business supplies. Combine rising costs with declining revenues, and you have a shortage. Regardless, companies that rely on advertising for revenue are seeing declines. Radio gets most of its revenue from advertising. This is why companies such as Audacy and iHeart are focusing on building other businesses that might be based more on subscription rather than advertising.

 

[PTBoardOp94]

These aren't "national layoffs." They're all targeted to local markets.

If you actually believe that, there's some ocean front property in Arizona for you.

The thing that's national is they make national news. But do you have a press release from the company with a quote from Pittman announcing layoffs that are aimed at boosting the stock price? That's what I'm talking about.

The only reason a company eliminates positions in a coordinated fashion is for profit and loss reasons. We don't need Bob Pittman to etch that on a stone tablet and publish it on the front page of RadioInsight.

 

[TheBigA]

If you actually believe that, there's some ocean front property in Arizona for you.

Show me a company press release that says this is national. I'm waiting. So far, I've seen a total of 12 names. They have over 18,000 employees! That's not a national layoff plan. That's a handful of markets that are having trouble meeting their local numbers.

The only reason a company eliminates positions in a coordinated fashion is for profit and loss reasons. We don't need Bob Pittman to etch that on a stone tablet and publish it on the front page of RadioInsight.

But the COMPANY isn't eliminating positions in a coordinated fashion. That is complete fiction. The layoffs are coming from specific markets that each have their own managers and presidents. It's not as though the company is eliminating 10% of it's total workforce. Show me that, and you may be right.

 

[davideduardo]

iHeart is a very decentralized company. Station budgets are regional and local, with market managers and regional VPs making staffing decisions.

But those local decisions are based on corporate's performance requirements for each cluster or region.

 

[davideduardo]

That is way too much lifted directly from the Barron's article. In fact, the poster has copied and pasted the whole thing. That could get this website in trouble.

We did not notice this until now, but the post has been edited.

Note to ALL USERS: Fair Usage allows a tidbit of a published article but not the whole thing.

 

[TheBigA]

But those local decisions are based on corporate's performance requirements for each cluster or region.

They leave the ways in which those markets meet those numbers to the market manager.

 

[davideduardo]

They leave the ways in which those markets meet those numbers to the market manager.

And at this point they have cut technical, office expense and the like so the only remaining possibility for cost reduction is in live air talent.

 

[PTBoardOp94]

Show me a company press release that says this is national. I'm waiting. So far, I've seen a total of 12 names. They have over 18,000 employees! That's not a national layoff plan. That's a handful of markets that are having trouble meeting their local numbers.

The idea that a company has to acknowledge a layoff via press release for it to be real is a fiction you invented.

Perhaps you can find me the iHeart press release announcing layoffs in January 2020, where a much larger round of iHeart layoffs occurred.

 

[TheBigA]

The idea that a company has to acknowledge a layoff via press release for it to be real is a fiction you invented.

Have you been following the context of this thread? Read post #4, and my response.

So the context here is that the company announces mass layoffs in an attempt to help the sagging stock price That's where the idea of the press release originated. Just laying off a dozen people in various selected markets is not going to affect the stock price of a $2 billion company.

Conversely, two years ago, when Audacy announced its programming changes affecting country and alternative, it put out a press release announcing the changes and the consolidation of staff that resulted.

 

[TheBigA]

And at this point they have cut technical, office expense and the like so the only remaining possibility for cost reduction is in live air talent.

But if you look at the list of cuts, they include the PD of The Bull and an SVP in New Hampshire. So they're not all on air.

 

[davideduardo]

But if you look at the list of cuts, they include the PD of The Bull and an SVP in New Hampshire. So they're not all on air.

Yeah, I should have said "live air talent and local programmers". iHeart is moving rather rapidly to away from locally administered programming in many markets, so the life expectancy of a PD job in secondary stations or secondary markets is pretty limited.