Guggenheim cuts Gray Television target to $7, maintains Buy

Monday, Gray Television shares are in the spotlight after Guggenheim’s latest report. Analyst Curry Baker at Guggenheim has revised the price target for Gray Television (NYSE:GTN) to $7.00, down from the previous $8.00, while still maintaining a Buy rating on the stock. Currently trading at $3.74, the stock sits notably below its 52-week high of $7.41. According to InvestingPro analysis, GTN is trading at compelling valuations with a P/E ratio of 1.11 and P/B ratio of 0.17. The adjustment follows a detailed review of the company’s fourth-quarter results and its forward-looking guidance.

Baker’s analysis took into account a tempered forecast for 2025 revenue and adjusted EBITDA, now set at $3.21 billion and $726 million respectively. This downward revision primarily stems from a more conservative outlook for core advertising and retransmission revenues. While InvestingPro data shows the company maintains a healthy dividend yield of 8.56%, analysts anticipate a sales decline in the current year. Despite the lower projections, Gray Television remains committed to reducing its debt, having achieved a net reduction of $520 million in 2024.

The company’s focus on deleveraging is underscored by its significant free cash flow (FCF), which Guggenheim estimates to average $257 million annually for the 2025/26 cycle. This translates to approximately $2.62 per share, suggesting a robust 73% FCF yield. Baker notes that Gray Television is poised to benefit from a potential easing of interest rates and any deregulatory efforts from the Federal Communications Commission ( FCC (BME:FCC)) in 2025.

In summary, while the price target has been lowered to $7.00, Guggenheim’s outlook on Gray Television remains positive, underlined by the continued Buy rating. The firm’s analysis indicates that despite a conservative view on certain revenue streams, the company’s strong free cash flow and proactive debt management are key factors supporting the optimistic stance.

In other recent news, Gray Television reported its fourth-quarter 2024 financial results, exceeding earnings per share (EPS) expectations with an actual EPS of $1.59, compared to the forecast of $1.17. Revenue, however, slightly missed projections, coming in at $1.05 billion against an anticipated $1.06 billion. The company achieved a significant debt reduction, lowering principal debt by $520 million in 2024. Loop Capital adjusted its price target for Gray Television to $6 from $7 but maintained a Buy rating, citing better-than-expected performance in core advertising and distribution revenue. Wells Fargo (NYSE:WFC) upgraded Gray Television’s stock rating from Underweight to Equal Weight, setting a price target of $4.00, and noted the company’s debt reduction efforts and favorable regulatory environment as positive factors. Analysts highlighted potential benefits from leaner TV bundles and a more favorable retransmission consent dynamic. Gray Television’s management continues to focus on deleveraging, with current debt standing at 5.5 times cash flow. The company’s strong portfolio of television stations positions it well for potential local broadcasting deregulation.

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