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Q2 2019 Media Quarterly Review
Noble Capital Markets
Is It Too Far Out To Bet On Political Advertising?
Most media stocks under-performed the general market in the second quarter, although there were some significant variances in individual stocks (which are discussed later in this report).
The general market as measured by the S&P 500 Index increased 3.8% in the second quarter, with Noble’s market cap weighted TV (+3.2%) and Radio (+3.5) indices finishing in-line with the S&P. Notably, larger cap stocks performed well, while smaller caps significantly under performed.
We believe that investors continue to follow momentum behind companies with significant M&A activity and are unforgiving for companies that miss quarterly expectations. A perfect example is the 27% drop in E.W. Scripps (SSP) shares from highs prior to its first quarter release to near current levels. In our view, at this stage, fundamentals matter. Investors seem unwilling to look too far into the future, even into 2020 when many media companies will get an influx of political advertising. Investors appear to be looking over their shoulders for a potential economic downturn, given the late stage of this economic cycle, now the longest economic expansion in our history. As such, investors seem to be focusing on liquid, large cap names and avoiding debt leveraged companies, which is typical in a late cycle. Positive news will send the stocks...
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