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Thursday, October 10, 2013

Report: Boom Time for Broadcast Stocks


Something quaint is happening in TV land. Amid all the talk about new technologies for delivering video, it's the local broadcasters—the companies that carry local news and sitcom reruns—that are stealing the show, according to Barrons.

Shares of Nexstar Broadcasting Group (ticker: NXST), an operator of 72 local TV stations, are up 254% in 2013. The surge bests even the torrid pace of Netflix (NFLX), the leading proxy for TV's hyped future. Sinclair Broadcast Group (SBGI), with 149 stations, is the largest of the pure-play broadcasters; its shares are up 133%.

The party is just under way, according to Barrons. Nexstar and Sinclair could easily gain 20% in the coming year. And the stocks could double from there, as investors begin to recognize the considerable value tied up in the airwaves. Spectrum is a hot commodity, as consumers pull more and more data to their smartphones. And the broadcasters, thanks to TV's over-the-air history, happen to control a large swath of airborne real estate.

Broadcast bulls contend that Nexstar and Sinclair's spectrum licenses could be worth as much as the companies' entire market value today.

In the near-term, broadcasters are benefiting from an ad recovery, just as a new revenue stream from licensing content kicks into gear. After years of giving away their channels to cable and satellite companies, the broadcasters have found religion when it comes to getting paid for content. And broadcast content remains a living-room mainstay. Most top-rated shows still originate on the broadcast dial—including popular sitcoms and big-event programming like the Super Bowl and Academy Awards.

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