On Monday, BofA Securities revised its price target for iHeartMedia (NASDAQ:IHRT) shares, reducing it to $1.00 from the previous $1.70. The firm maintained its Underperform rating on the stock. The adjustment follows a significant decline in the company's share value, which has dropped approximately 65% year-to-date.
The current valuation reflects challenges in the broadcast radio industry's recovery and less-than-expected guidance for the second quarter, affected by the timing of expenses. Additionally, the company's net leverage remains high at 6.9 times.
Analysts at BofA Securities project that political revenue in the 2024 cycle, which is pacing about 16% above the 2020 figure of $167 million, will likely improve leverage to around 5.5 times by the end of the year.
Despite the anticipated leverage improvement, BofA does not foresee a further reduction in leverage in 2025 without the boost from political advertising revenue.
This is of particular concern given the approaching debt maturities starting in May 2026, with $3.1 billion due, representing nearly 59% of the company's total debt of $5.2 billion.
The firm estimates iHeartMedia's liquidity at $788 million and forecasts free cash flow generation of approximately $220 million for the current year. Additional cost savings could potentially enhance leverage further.
However, the analyst highlighted that the company's capital structure is under pressure due to secular industry headwinds and the trading of its unsecured notes at distressed levels.
During the first-quarter earnings call, iHeartMedia's management indicated they are exploring options concerning their capital structure but did not provide further details.
BofA Securities anticipates that the company will take a cautious approach to managing its capital structure and aims to address outstanding questions before its debt becomes due. Until then, credit concerns are expected to continue affecting the company's equity performance, according to the firm's analysis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.