BofA keeps iHeartMedia shares rating at underperform, target at $1 amid ad uptick

On Thursday, BofA Securities maintained its Underperform rating on iHeartMedia (NASDAQ:IHRT), with a steady price target of $1.00. The firm's outlook anticipates iHeartMedia's third-quarter 2024 earnings to mirror recent patterns, with a boost from political advertising due to the upcoming U.S. election.

BofA Securities expects the company to achieve its projected third-quarter revenue of $1 billion, marking a 5% year-over-year increase, aligning with the company's forecasts.

iHeartMedia has hinted at a modest recovery in the advertising market, a positive note given the sector's struggles over the last 18 to 24 months. The projected revenue breakdown for the third quarter includes broadcast revenue at $466 million, a 2.5% increase year-over-year, digital revenue up by 11% to $298 million, and networks revenue declining by 13% to $101 million.

Additionally, sponsorship and events are expected to bring in $47 million, while audio and media services could generate $87 million.

The anticipated improvement in revenues, coupled with the high-margin political advertising, is reflected in BofA Securities' adjusted EBITDA estimate for iHeartMedia, which stands at $210 million for the third quarter. This figure is consistent with the company's guidance and represents a 3% growth from the previous year.

The extent of recovery in the advertising market, along with political spending, are considered crucial factors for iHeartMedia's performance in the latter half of the year.

In other recent news, iHeartMedia's Q2 2024 earnings report showed steady growth with an adjusted EBITDA of $150 million and a 1% year-over-year increase in consolidated revenues. The company's Digital Audio Group also saw a 10% increase in revenues, while the Multiplatform Group's revenues declined by 3%.

Despite this, Goldman Sachs maintained a Neutral rating on iHeartMedia shares, keeping the stock target steady at $1.00. This decision followed the company's Q2 earnings, which surpassed consensus expectations in both revenue and Adjusted EBITDA. However, the third-quarter outlook provided by iHeartMedia was mixed, predicting revenue above consensus but Adjusted EBITDA below.

iHeartMedia is also investing in technology upgrades, including a Programmatic platform, and is in active discussions with debt holders to improve its capital structure.

InvestingPro Insights

Recent data from InvestingPro sheds additional light on iHeartMedia's financial situation and market performance. The company's market capitalization stands at $319.35 million, reflecting its current valuation in the market. Despite the challenges in the advertising sector mentioned in the article, iHeartMedia has shown strong short-term performance, with a 15.88% price return over the past month and an impressive 92.59% return over the last three months.

InvestingPro Tips highlight that iHeartMedia's stock price movements are quite volatile, which aligns with the uncertain advertising market conditions discussed in the article. Additionally, analysts do not anticipate the company to be profitable this year, which may explain BofA Securities' Underperform rating and $1.00 price target.

It's worth noting that iHeartMedia's revenue for the last twelve months as of Q2 2024 was $3.75 billion, with a slight revenue growth of 0.99% in Q2 2024 compared to the previous quarter. This data provides context to the article's discussion of the company's projected Q3 2024 revenue of $1 billion.

For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for iHeartMedia, providing a deeper understanding of the company's financial health and market position.

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