In a letter to investors on Monday night, Wells Fargo analyst Marci Ryvicker reiterated her support for radio’s newest big player, especially now that the CBS Radio integration is fully underway. “With a market cap of $1.6 Billion and an enterprise value of $3.3 Billion, this stock is hitting many investor screens.” She said, despite the market’s trepidation with the radio industry’s weak revenue performance and high debt loads, Entercom is a different story. The Entercom stock closed on Friday at $11.35 and Ryvicker has now raised her price target on the stock to $15.00
Ryvicker said she is now looking at 2018PF FCF/share of $1.91 and a P/FCF multiple below 6x. “With a balance sheet levered well under 4x, a $100MM share repo, a 3.2% dividend yield, and $40MM of excess cash post tax reform, Entercom remains one of our favorite FCF (Free Cash Flow) stories. We reiterate our Outperform.”
The respected analyst says Entercom is not a quarterly story, or even a revenue story – though it could be. “Again, we maintain our “slightly up” revenue trajectory for Entercom and a LSD decline for the industry but do believe there is more potential upside vs. downside, for a number of reasons. These reasons are: low hanging fruit at CBS, national scale in sports, and the ultimate “recoveries” of two industry leaders in IHRT and CMLS.
What Ryvicker means by low-hanging fruit with the CBS stations is that she believes Field and his team can fix the problems with the CBS stations. Some of those stations, according to Field, were mismanaged the last few years, which contributed to lower revenue. Changes such as bringing in new management and launching new brands have already been made in several cities.
Ryvicker says that while the integration of CBS Radio is clearly a significant undertaking, she’s not concerned given David Field’s knowledge of the assets and M&A track record. “Of course, as with any cyclical industry, the biggest risk is macro – which nobody can predict. One thing we can tell you is that this company’s leverage profile is much healthier than what we saw in past economic downturns.”
Entercom CEO David Field was Radio Ink’s 2018 Radio Executive of The Year. Read that cover story HERE