- One of the companies that suffered the most during the last few years in the stock market is now ready to embark on the road to recovery.
- Sinclair’s management expects to take the necessary restructuring steps to provide investors with greater clarity.
- So far this year, the company’s stock market performance has been outstanding, with earnings clearly outperforming the market average.
So far in 2023, Sinclair Broadcast Group shares are experiencing a positive rise on the New York Stock Exchange. Behind this positive investor mood there would be two important facts. The first is an alliance with Alphabet’s YouTube and the second is a plan to restructure the company.
Thus, the first of these factors seems to be already generating positive news for the firm’s shares. In that sense, so far this year its shares enjoy a healthy 31.7%. So far this week, as of late Friday, growth was counted at 12.5%. These data, taken from Yahoo Finance, show that the mood of investors is full of positive sentiment.
Investors’ bullish view on this company would not be limited to the recent deal with Alphabet. The focus is now on what will be a complete restructuring of the company. According to information from some specialized portals, the shareholders’ table would approve the plan of profound changes for the second half of this 2023.
The company’s board of directors expects the changes to provide greater clarity for investors. They also expect that this restructuring will result in an adaptation of the company to the new reality of the television market.
Sinclair’s shares amid strong momentum
As mentioned above, so far in 2023 Sinclair shares stand at a positive 31.7%. This is a price considerably above the market average and one that could continue to rise judging by investor sentiment. For comparison, this week the benchmark S&P 500 index rose 0.9% while the Nasdaq outperformed with 1.3%.
The factor that drove the streaming company’s shares was an agreement with YouTube TV to broadcast part of its sports programming. Specifically, it is the Tennis Channel and its sister channel T2, which will be available on Alphabet’s popular video platform.
It should be noted that Sinclair is a large conglomerate. It brings together 185 television stations in a total of 86 markets. In addition, there are national and state networks. Among the latter are Bally and Tennis Channel.
Thus, the Youtube platform will broadcast the programming of the two networks as of June 1. This date coincides with the start of the French Open, one of the most followed grand slam events in the sport. It is worth mentioning that this channel broadcasts more than 90% of all professional tennis tournaments of the year.
But this agreement with YouTube is not limited to sports, but also includes the Charge and TBD networks. The latter is known for producing dramas and the former specializes in producing reality shows. With such a deal driving reach for both companies, it’s no wonder Sinclair’s stock is experiencing a strong rebound.
Radical changes in the group’s structure
But what could qualify as the main attraction for Sinclair’s shares is yet to come sometime this year. It is a radical restructuring of the group that could be seen as a historic new stage for this long-established company. That plan for change was announced by the board last week.
The main aspect of this change is that the public stake in the stock exchange will be held by Sinclair Inc. It should be noted that until now the shares have been held by Sinclair Broadcast Group. This step consists of giving greater breadth to the business so that it goes beyond the exclusive area of broadcasting. In this sense, the latter becomes one of the arms or subsidiaries of the former.
It should be noted that the company also owns several companies other than its television channels. These include technical services and software, technology, advertising and intellectual property companies. As can be seen, Sinclair will move from being an investable company to gain exposure to the changing television and broadcast sector to something much broader. With this, the range of target investors that could be attracted to place capital in it widens.
But the group’s businesses extend into more varied sectors in which investments in real estate, venture capital, private equity and direct investments can be raised. This pool will form part of a separate subsidiary called Sinclair Ventures. The shareholder vote for these changes, according to the company, will occur in the second quarter of 2023.
This spectrum expansion by Sinclair could become a major driver for the stock. It is worth mentioning that the price of each share is outrageously low and that discount comes from years of losses. The latter is directly related to the evolution of the production and transmission business.
Sinclair shares at a discount price
The current stock price of this company’s shares on the exchange ($20.54 each) is considerably low compared to previous years. The same can be said if you take into account the projection that the company could have with the structure changes that are implemented for the second half of the year. The poor momentum of its public listing has been going on for three years.
Thus, its shares came to cost more than $64 dollars each in mid-2019. In 2021 they experienced some recovery, although they did not regain the highs. Since then, the fall has zigzagged to the current purchase price. Thus, despite current gains, the shares continue to trade below earnings.
The reasons for the bad times translate into massive cable cuts amid a changing and totally uncertain television landscape. For three consecutive years, the stock closed lower. But what looks more frightening is the annualized loss of the last 5 years, which averages -6.8% per year. Against this backdrop, it can be said that the company is basing virtually all its hopes on the success of the reorganization.
Sinclair’s CEO, Christopher Repay, expects the shares to maintain the momentum and to join the possible upside this year. Regarding that he expressed:
“We believe that these other assets, some of which are currently buried in the broadcast division, may receive greater visibility outside of the Broadcast umbrella.” In the meantime, Sinclair will become a broadcast-focused subsidiary so that shareholders can better appreciate its true performance. In short, we believe a holding company structure can unlock unrecognized value.”
Is this company worth investing in now?
Making a decision on whether or not to invest in this company’s shares is extremely complex. It is worth mentioning that the likelihood of maintaining the current upward momentum is not entirely guaranteed. Like most stocks in the market, Sinclair’s stock could fall as a result of macroeconomic conditions.
For Fool’s analysts, it is best to wait and see what happens in this current momentum. Then, if the restructuring plan is approved, perhaps it would be a good time to get in. On the other hand, a recent report from StockNews.com gives a slightly more positive rating to these stocks and places them on “Hold” or treasure.
The aforementioned analysis site bases its rating on several positive aspects of the company. One of them has to do with the earnings per share (EPS) reported in its most recent quarterly report at the end of February. At that time, Sinclair’s EPS came in at $0.90, which beat the $0.62 forecast.
Similarly, it summarized that return on equity was close to 17%. The latter allows investors to see a solid growth prospect compared to the industry.
While all of this might be enough to give Sinclair stock a buy rating, the StockNews report also raises caveats. Specifically it states that by the end of the year EPS could be placed in red territory of -0.16%.
For Bloomberg analysts, the rating is mixed with 2 Sell, 2 Hold and 2 Buy ratings.
This work is for informational purposes only and, under no pretext, should be assumed as an advice or invitation to invest.
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