Tuesday, December 1, 2020

A Small Cap Equity holding: Nexstar Media Group Inc. (NXST, $109.35): “And our Nexstar in the industry is…” by: Holden Patterson, AIM Student at Marquette University

 Nexstar Media Group Inc. (NXST, $109.35): “And our Nexstar in the industry is…”

By: Holden Patterson, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


• Nexstar Media Group Inc. (NASDAQ: NXST) is a television broadcasting and digital media company that operates all across the United States. In addition to operating local television stations, they also develop many local interactive community websites and provide digital media services.

•  NXST will be brining NEXTGEN TV, a new IP broadcasting system that lets internet content be transmitted through over-the-air broadcast signals, to their local station in Raleigh, NC.  

•  NXST recorded record net revenue of $1,118.2 million in Q3 of 2020 which was 68.5% higher than Q3 of 2019. 

•  NXST capitalized on the United States electins in 2020, bringing in 132.4 million of political revenue during Q3. 

•  In September, NXST launched WGN America’s primetime national newscast, News Nation, in addition to the mobile app, NewsNationNow, helping them reach millions of users. 

•  NXST repurchased1,300,000 shares of its Class A common stock at an average price of around $96.14 per share. 

Key points: Nexstar is one of the major broadcasters that will be brining NEXTGEN Tv to their local television station in Raleigh, NC. NEXTGEN TV is an Internet Protocol (IP) based system that can transmit internet content and services over the traditional over-the-air broadcast signal. This technology will improve signal, give greater sound and higher quality picture, expand transmitting distance, and provide additional features such as video-on-demand. 

NXST recorded record net revenue of $1,118.2 million in Q3 of 2020. This was 68.5% higher than Q3 of 2019. Of the third quarter television advertising revenue of $514.3 million, 132.4 million is political revenue and $381.9 million is core advertising revenue. Although it is unlikely that they will maintain this high level of political revenue after the presidential election coverage comes to an end, they were able to capitalize on this huge event. 

NXST launched WGN America’s primetime national newscast on September 1st, News Nation, which is viewed by around 75 million television households across the country. This launch also came with an accompanying mobile app, NewsNationNow which gives their audience the ability to follow their stories and coverage with the simplicity of their smartphone.

NXST recently repurchased a total of 1,300,000 shares of its Class A common stock at an average price of $96.14 per share for a total cost of $125 million. This was funded from cash flow from operations. NXST CEO, Perry Sook, says quarterly cash dividends and share repurchases will continue to be a priority of their capital allocation. 

What has the stock done lately? After taking a huge hit at the start of the pandemic in March, NXST has started to move back towards where it was at in the beginning of 2020. YTD the stock has decreased by 5.19%, but since they hit a low of $43.37 at the end of march the stock has increased by 152.13% to $109.35 today. 

Past Year Performance: NXST has not yet retuned to the level they were trading at in January and February of 2020 but has recovered nicely from the pandemic. Sitting around $109.35, NXST has seen a steady growth of around 2% for the past 52 weeks. This is promising to consider the massive hit they suffered at the start of the pandemic. They have followed a very similar pattern as the Russel 2000 index but have consistently seen lower levels of return over this past year.  

Source: FactSet

My Takeaway

NXST is right where they need to be. They have done a great job reacting to the pandemic which is seen by their record net revenue growth in Q3 and are effectively moving in the direction their industry is going. I believe this is a stock that we will see do quite well in the next couple years as they continue to rollout technology such as NEXTGEN TV into more and more cities to combat against the internet of things movement. This stock should be held in the AIM portfolio until their business becomes unable to keep up with where the television/media industry is moving. 

Source: FactSet