Since Friday’s Opening Bell on Wall Street, iHeartMedia shares were down by more than 20% in value.
Why? A diverse array of analysts’ estimates and stock target prices could be a reason for the volatility.
The nation’s No. 1 owner of radio stations late Thursday released a Q2 2021 earnings report that was largely upbeat; iHeartMedia lowered its quarterly net loss.
However, the fact there is a net loss could be worrisome to investors, especially as the audio media giant led by Bob Pittman and Rich Bressler remains straddled with billions of dollars in debt.
Given the strong rebound seen by its radio sector peers and nearly every broadcast TV company, does Wall Street expect more from iHeart in the way of expense reduction and revenue enhancement?
That’s possible. What is clear, however, is that iHeart’s Q2 2021 loss was wider than the Wall Street consensus estimate.
As RBR+TVBR reported August 5, the net loss attributable to iHeartMedia shrunk to $32.29 million from $197.32 million. As financial blog Simply Wall St. sees it, that amounts to an EPS loss of $0.22 per share.
Unfortunately, the EPS loss was 43% wider than what the analysts had included in their models, Simply Wall St. says.
Consolidated revenue increased year-over-year by 77%, to $861.61 million from $487.65 million in the COVID-19 impacted Q2 2020. That beat expectations “by a respectable 6.5%,” the blog points out. The issue: statutory losses per share increased.
“Taking into account the latest results, the most recent consensus for iHeartMedia from nine analysts is for revenues of $3.48 billion in 2021 which, if met, would be a satisfactory 7% increase on its sales over the past 12 months,” the blog noted Monday (8/9). “The loss per share is expected to greatly reduce in the near future, narrowing 37% to $1.31. Yet prior to the latest earnings, the analysts had been forecasting revenues of $3.41 billion and losses of $1.15 per share in 2021. While this year’s revenue estimates held steady, there was also a noticeable increase in loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.”
Indeed, there’s a wide spread on the 1-year price target offered for IHRT among analysts that track the stock. The most bullish analyst values iHeartMedia at $36 per share, while the most bearish prices it at $23.
What, then, is the realistic growth expectation for iHeartMedia?
Simply Wall St. states, “We noticed that iHeartMedia’s rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 14% growth to the end of 2021 on an annualized basis. That is well above its historical decline of 17% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 5.0% per year. Not only are iHeartMedia’s revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.”
That’s a net positive for iHeart and its investors, with data that suggest revenues are expected to grow faster than the wider industry.
Still, Simply Wall St. warns it “wouldn’t be too quick to come to a conclusion on iHeartMedia.” Why? Long-term earnings power needs a closer look.
That could be what some of the more impatient investors are doing, as iHeart’s recovery, well underway, could simply be more prolonged given its high debt.
At Monday’s Closing Bell on the Nasdaq GlobalSelect market, IHRT was priced at $20.90, off 4.9% from August 6. It is the lowest closing price seen since May 6, 2021.
