Nexstar Media stock falls after Grizzly Research said it is short

Investing.com -- Grizzly Research has announced its short position on Nexstar Media Group, Inc. (NASDAQ:NXST), citing concerns about the company’s digital strategy. Nexstar, a U.S. television and radio company with nearly 200 stations, has been leaning heavily on digitalization due to the declining revenue from traditional TV. However, Grizzly Research has found that web traffic, app downloads, and overall interest in Nexstar’s digital offerings are rapidly declining.

Share of Nexstar Media fell 4% by 9:55 AM ET following the short report.

Nexstar’s digital strategy has been under scrutiny, with the company often touting its digital assets, which include 138 websites and 229 mobile applications across its local stations, NewsNation and The Hill. Despite these assets, former Nexstar executives and directors have expressed frustration with the company’s digital strategy, stating that the leadership appears ignorant of new media technology and lacks a serious strategy for digitalization.

Nexstar’s current earnings are reportedly based on extreme underinvestment in new technology and employees, with the company instead buying back stock and paying dividends to appear financially strong. The company had a strong business year in 2024 due to political ads, but this source of revenue is drying up. The acquired digital assets are underutilized and their development is usually stalled.

Nexstar Digital has a low rating of 2.3 out of 5 stars on Glassdoor from 102 employee reviews, which the company attributes to insiders’ knowledge about the company’s quality. Many of Nexstar’s digital assets are barely used, and those with users see strongly declining engagement.

The CW, Nexstar’s key asset for attracting younger audiences, has seen a decline of between 76% to 95% in user interest, web traffic, and app usage. BestReviews.com, Nexstar’s key digital asset for consumer insights, audience growth and monetization, has only 6% of former web traffic left. Other large digital assets for Nexstar, by The Hill and NewsNation, have seen a decline in traffic and interest over the last two to three years, with decreases ranging from 20% to 53%.

Nexstar’s apps are rated far below 4 or even 3 stars in app stores due to being technically outdated. Most Nexstar apps are localized news and weather apps with barely any downloads. While Nexstar has uploaded hundreds of thousands of videos on its YouTube channels, most of these videos have barely more than a few thousand views.

Studies show that consumers prefer social media platforms for news, leading to local news station companies, like Nexstar, losing their audience. Nexstar’s negative sentiment is supported by insiders aggressively selling shares during a time when the company is buying back shares.

From past acquisitions, Nexstar reports $2,922M in goodwill at a total shareholders’ equity of only $2,242M. Grizzly Research believes a substantial portion of this goodwill should be written off, given the poor future prospects of Nexstar’s business. In conclusion, Nexstar may not benefit from its legacy TV business for as long as it expects, and the company appears unable to effectively pivot its strategy to the highly competitive and rapidly growing digital market.

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