GAMCO Investors Chairman and CEO Mario Gabelli sees significant upside in several media stocks over the next couple of years.
Wednesday morning on CNBC’s “Squawk Box,” Gabelli highlighted opportunity in the media space.
Budgets for political advertising are going to increase from $2.5 billion to $14 billion in 2024, so the television stations are poised to get a bump, he said.
“As a result of that, I like those kind of companies even though they are linear television, even though they are kind of dated,” Gabelli said.
One of his top picks in this space is TEGNA Inc (NYSE: TGNA), which he suggested is extraordinarily cheap on a price-to-earnings basis. The stock has a forward P/E of 8.76, according to data from Zenger News Pro.
The stock is trading below $17 per share and Gabelli noted that the company had a deal to be bought for $24 per share. Although the deal was derailed by regulators, he still believes it shows where the stock should be valued.
“They’re gonna be $24. You’re going to make 50% in 18 months,” he said.
Tegna scrapped its merger agreement with Standard General in late May after the deal faced criticism from members of Congress on concerncs of elevated TV prices for consumers, per Reuters.
Right now, the Federal Communications Commission (FCC), which regulates the telecom industry in the U.S., only allows TV station operators to have up to 39% coverage, but Gabelli expects the FCC to lift the cap.
Companies like Walt Disney Co (NYSE: DIS) and Paramount Global (NASDAQ: PARA) are likely to consider holding onto their networks and selling or spinning off the TV stations as a result, he said.
It’s not going to happen under the current administration, but the 2024 election is right around the corner, he said. Even if it doesn’t happen, the stocks are still undervalued and don’t need a regulatory adjustment to do well, Gabelli added.
TGNA, DIS, PARA Price Action: Tegna is down approximately 20% year-to-date. Disney is down close to 20% over the last year and Paramount is down more than 35%.
At publication time, Tegna was trading flat at $16.78, Disney was down 1.91% at $87.32 and Paramount was down 2.21% at $15.71, according to Zenger News Pro.
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