By Sam Boughedda
Nexstar Media (NASDAQ:NXST) was downgraded to Equal Weight from Overweight, with the price target cut to $175 from $227 at Wells Fargo on Wednesday.
Wells Fargo analysts told investors in a note that they believe early 2023 will bring a cut to FCF guidance driven by higher cord-cutting and higher cash interest at the company.
"Combined with The CW, this resets NXST's earnings power, and we think the shares will be range bound from $155 (pre earnings) to $175 at least until this has all been digested and/or estimates start moving up," they wrote.
"NXST reiterated its guidance for mid-teens retrans in 2023E and noted that vMVPD net revenue is comparable to traditional MVPD net retrans. In other words, MVPD subs switching to vMVPDs are not a headwind to FCF. However, we think Broadcast industry sub churn has been coming in at -5% y/y and that's what's baked into guidance ranges, whereas we think the latest Q3 trends indicate it's heading to more like -7%. Media/Broadcast companies get sub counts in arrears," the analysts added.
However, the analysts did note that downside risk is "limited by NXST's strong balance sheet and cash deployment," and upside potential could come from operational excellence ahead of Wells Fargo's expectations.