Wall Street continues to hammer away at the radio industry.Analysts at Goldman Sachs, RBC Capital Markets and A.G. Edwards either downgraded radio stocks or cut their estimates Thursday. These reports -- along with notes earlier in the week from such firms as J.P. Morgan and Banc of America -- reflect increasing pessimism about demand for radio advertising despite the improving economy and the strength of other advertising media. The mood among analysts also underscores the apparent despair felt by Mel Karmazin, the radio industry veteran who resigned his post at Viacom ( VIA.B) earlier this month. His decision was driven in part, reportedly, by his
For buy-and-hold investors, says Rosenstein, radio companies should be valued on the basis of their "considerable" free cash flow generation. "In the near term, however, forecasting even revenue growth from one month or quarter to the next has been challenging," he writes, "and there appears little reason to believe the market would accept the notion of stronger growth until some evidence of it emerges." With investors more likely to judge radio companies by their current earnings before interest, taxes, depreciation and amortization, "it would be difficult to characterize valuations currently as truly compelling," Rosenstein writes. Other problems are that there's too much advertising supply, and prices are eroding as the industry struggles to fill it, according to Rosenstein. Advertisers' perception of the return on investment in radio advertising has been declining in recent years, he says.
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