TEGNA Inc.

TGNA Details

TEGNA Inc. (NYSE: TGNA) operates as a media company with 64 television stations in 51 US markets. TGNA operates via four segments namely, 1) Subscriptions, reflecting fees paid by satellite, cable, over-the-top (OTT), and telecommunications providers to carry the company’s television signals on their systems; 2) Advertising & Marketing Services (AMS), which include non-political television advertising, digital marketing services, and advertising on the stations; 3) Political Advertising, driven by even-year election cycles at the local and national level; and 4) Other services, such as the production of programming and advertising material. As of June 01, 2021, the company’s market capitalization stood at USD 4.28 billion.

Demographic Footprint (Source: Investor Presentation, May 2021)

Unveiling New Automotive and Tourism Attribution Capabilities: On May 04, 2021, the company announced several initiatives at the IAB NewFronts, the largest digital media marketplace in the US. At NewFronts, TEGNA announced the expansion of its attribution solution to measure the performance of linear TV and streaming campaigns and stated that in 2021, it will provide industry-specific performance data for the automotive and tourism industries. Advertisers in these categories will have access to advanced, industry-specific outcomes and sales data for their campaigns.

Q1FY21 Results: The company reported a slight increase of 6.26% in total revenue to USD 727.05 million in Q1FY21 (ending March 31, 2021) compared to USD 684.19 million in Q1FY20. Revenue from the Subscription segment grew by 16.21% in Q1FY21, primarily due to annual rate increases under existing and newly renegotiated retransmission agreements. The net income for Q1FY21 was USD 112.83 million, 30.90% higher than USD 86.20 million in Q1FY20.

Key Risks: In FY20, 40% of the company’s revenues were derived from television spot and digital advertising, and the demand for advertising is highly dependent upon the strength of the US economy. A decline in economic conditions could have a significant adverse impact on TGNA’s business. In addition, TGNA relies heavily on its information technology (IT) systems to manage business data, communications, news and advertising content, and other business processes. Any broadcasting disruptions, transaction errors, and processing inefficiencies as a result of the failure in the IT performance could cause loss of sales and customers.

Outlook:

TGNA Q2FY21 & FY21 Expectations (Source: Investor Presentation, May 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TGNA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: On May 07, 2021, TGNA defeated the activist shareholder hedge fund Standard General in a proxy vote which saw all 12 of the directors being re-elected to the board. The company’s share price has increased by 36.83% and 60.91% in the past 6 and 9 months, respectively, and is currently leaning towards the higher end of the 52-week range of USD 10.25 to USD 21.52. The stock is currently trading above its 200 DMA levels. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 16.87. Considering the consistent increase in stock price, recent developments, decent financials, and current valuation, we recommend an “Expensive” rating on the stock at the closing price of USD 19.84, up by 2.32% as of June 01, 2021.

* The reference data in this report has been partly sourced from REFINITIV.