Why These Stocks Could Skyrocket in a Presidential Election Year

Presidential election years are usually pretty good years for the stock market. In 2020, the S&P 500 finished the year up 16.3%, despite being crushed by the pandemic bear market in March of that year. In 2016, it returned 9.5%, and in 2012, the benchmark returned 13.4%.

In fact, since 1960, the only presidential election years in which the S&P 500 fell were 2008 and 2000, and those two years were marred by the global financial crisis and the dot-com bust, respectively.

There are many reasons why markets perform relatively well in presidential election years, many of which have nothing to do with the election. But there is one stock in particular, Nexstar Media Group (NASDAQ:NXST), which will skyrocket as a direct result of the election.

Thanks to political advertising

Nexstar Media is a media conglomerate that owns more local TV stations than any other company in the country. It has approximately 200 stations in 116 markets and serves approximately 212 million people. It also owns several networks, including The CW Network, NewsNation, Antenna TV, and Food Network (a minority stake), as well as the political news website The Hill. Last fall, it was reported that Nexstar was in talks with Disney to acquire ABC, but nothing has come of it at this point.

Nexstar, which has the largest number of TV stations, is growing on political advertising revenue. The impact was felt this year, but on a negative note compared to the 2022 midterms, as political advertising revenue was down significantly year-over-year.

In the third quarter, Nexstar only brought in $19 million from political ads, down from $129 million in the third quarter of 2022. In the first nine months of this year, Nexstar earned just $36 million from political ads, a small portion of its $1.2 billion total. Advertising revenue. This is 85% lower than the first nine months of 2022, when political ads generated $240 million of $1.5 billion in total advertising revenue.

In presidential election years, income increases even more. For example, in 2020, Nexstar earned $132 million in political advertising revenue in the third quarter. This represents approximately 26% of total advertising revenue. Net revenue for the quarter was $1.1 billion, up 68% from the previous year. In the first nine months of 2020, revenue rose 61% to $3.1 billion. Nexstar leadership expects these types of improvements in 2024.

In the third quarter earnings call, Nexstar President and Chief Operating Officer Mike Biard said the company expects to spend about $11.6 billion on political advertising in the 2024 election cycle, with about $5 billion of that going to be allocated to local broadcast TV stations. He said it would be.

“Given our extensive presence, accounting for more than 80% of contested elections, we are extremely well positioned to secure stakes and funding both locally and nationally. In fact, recent comments from major super PACs and election consultants support our view that local broadcasters will continue to account for the largest share of political advertising revenue in 2024,” Biard told analysts.

Great to buy now

Nexstar is expected to present guidance and forecasts for 2024 when it announces its fourth quarter and year-end results in February, but based on recent trends and past history, it is safe to assume that Nexstar will see a surge in sales in 2024. From the election.

The consensus view among analysts covering the stock is a Buy, with an average 12-month price target of $201 per share. This is an increase of approximately 27% from the current price of $158 per share.

The stock is also cheap relative to its expected earnings potential, with a forward price-to-earnings ratio (P/E) of just over 6.

Although Nexstar has significant near-term upside in 2024, it has had solid long-term performance, averaging an 11% return over the past decade. And the recent agreement between cable TV operator Charter Communications and Disney allows Charter to work with the network to offer Disney streaming content on cable platforms, further improving the long-term stability of its properties on those platforms.

Investors looking for a good election year buy will find it at Nexstar Media Group.

disclaimer: All investments involve risk. Under no circumstances should this article be taken as investment advice or constitute liability for investment profits or losses. The information in this report should not be relied upon for investment decisions. All investors should conduct their own due diligence and consult their own investment advisors when making trading decisions.