National advertising is showing some proverbial “green shoots” of growth after underperforming local advertising this year, according to Wells Fargo media analyst Steven Cahall. “Our checks suggest that local ads continue to hold-in, while national may be trending a bit better,” he says in a new report to clients ahead of this week’s release of quarterly revenue data from iHeartMedia. “Management previously spoke about having more optimistic conversations with marketers, which seems to track with our findings,” Cahall says. He says iHeartMedia also has “more leverage” with larger advertisers, considering its scale.
Digital has outpaced broadcast radio growth figures again this year, and Cahall expects that will again be the case for the third and fourth quarters at iHeart. “We expect podcast growth to remain a bright spot,” he says, noting that both Spotify and SiriusXM already spoke about increased podcast advertising spending when they released their third quarter results last month. “Early reports from digital peers suggest an acceleration in Q3, with no material weakness flagged into Q4,” he says.
Cahall tells clients that he believes iHeart’s stock underperformance – it is down 59% year to date – has been magnified due to concerns on company leverage as the fixed costs related to the radio station side of the business present “challenges” in the current operating environment. “While iHeartMedia faces easier comps in the second half excluding political, it's difficult to know how much national ad recovery management baked into its expectation for the back-half,” he tells clients.
iHeartMedia will release its third quarter results Thursday, Nov. 9.