BofA Downgrades iHeartMedia On Lower Visibility, Advertising, Event Headwinds

iHeartMedia Inc’s IHRT second-quarter results are likely to reflect substantial advertising and event-related headwinds from COVID-19 that will be offset only partially by cost saving initiatives and underlying digital growth, according to BofA Securities.

The iHeartMedia Analyst

Jessica Reif Ehrlich downgraded iHeartMedia from Buy to Neutral and cut the price target from $12 to $10.

The iHeartMedia Thesis

iHeartMedia faces soft and low visibility into terrestrial radio advertising trends and commute activity, and there is a lack of meaningful catalysts in the near term, Reif Ehrlich said in the downgrade note. (See her track record here.) 

The analyst lowered the second-quarter revenue and adjusted EBITDA estimates from $575 million to $555 million and from $50 million to $30 million, respectively, to better reflect event cancellations and uncertainty related to advertising in today's environment. 

The analyst expects iHeartMedia to report a 46% decline in broadcast revenue due to weaker local and national advertising trends, while projecting a 40% decline in networks revenue.

Although digital revenue may grow by 8%, driven by ongoing podcasting and streaming gains, audio and media services revenue is expected to decline by 3%, Ehrlich said.

The analyst also lowered the estimate for sponsorship and events revenue from $4 million to $1 million for the quarter.

IHRT Price Action

Shares of iHeartMedia had declined almost 3% to $8.11 at the time of publication Wednesday.

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