Emmis Communications Corporation (EMMS) owns and operates radio and publishing properties located in the United States. EMMS' revenues a...

Weekly Superstock Scan 18 July 2016 - 22 July 2016: Emmis Communications Corporation (EMMS)

Emmis Communications Corporation (EMMS) owns and operates radio and publishing properties located in the United States. EMMS' revenues are mostly affected by the advertising rates its entities charge, as advertising sales represent approximately 70% of its consolidated revenues. These rates are in large part based on its entities’ ability to attract audiences/subscribers in demographic groups targeted by their advertisers.


The price of EMMS was in a down trend since early 2010. It was only since the start of the year that the price started to stabilise. EMMS is trading in a base since the start of this year with a breakout at the start of June from $2.50 to $3 (adjusted for stock split). Last week, we saw a more convincing breakout as price moved from $3.52 to $3.96 in one week with six times its weekly average volume.


Including the most recent quarter, EMMS has experienced five consecutive quarters of  year-on-year EPS growth. In the most recent quarter, radio net revenue is up fractionally, from $42.6 million to $42.7 million. EPS doubled year-on-year primarily due to  to lower operating expenses excluding depreciation and amortization expense as a result of the cost reduction plan the Company implemented in January 2016.

Emmis New York A Bright Spot

EMMS' radio revenues in Q1 was flat despite weakness in Los Angeles. Taking out Los Angeles (not that there is a reason to do so), revenue will be up 5% versus markets plus 3%. A main reason is the strong showing by Emmis New York, which was up 11%.

NextRadio the Main Catalyst

From EMMS' press releases and earnings calls, it appears that EMMS is pinning all their hope on NextRadio. NextRadio is a smartphone app that connects over-the-air FM broadcasts with the internet to give users an enhanced radio listening experience including album art and program information as well as station feedback and other interactive features with the touch of a button.

For a video introduction of NextRadio, you may refer to the video here.

Since 2013, Emmis has entered into agreement with Sprint to pre-load the NextRadio app in a minimum of 30 million FM-enaabled wireless devices on the Sprint wireless network over a three-year period. Both AT&T and T-Mobile currently support NextRadio in the Samsung Galaxy S7 and S7 Edge smartphones operating on their networks. BLU Products, an American mobile phone manufacturer, has chosen to make NextRadio the native FM tuner on its Android smartphones. In April 2016, Alcatel entered into a similar arrangement for NextRadio.

+ Very low annualised P/E ratio of 4.15
+ Low float of 8.6 million shares

Risk Factors/ Things I do not Like

  • Radio revenue growth remained challenged - With new media, companies' advertising budget on radio may be transferred to new medias. Furthermore, competition from satellite radio and streaming radio lead to the fragmentation of the radio audiences and lower effectiveness of radio advertising.
  • Unsure how NextRadio will increase profitability - NextRadio may be getting more popular, but I am not sure how it will help EMMS. Through May 31, 2016, the NextRadio application had not generated a material amount of revenue. There is a call option granted to the U.S. radio industry on NextRadio which will provide EMMS a one-time profit boost but whether the call option will be exercised depends on how NextRadio can be monetised.

I will not be blogging on potential trade setup and superstocks update for the time-being as I am still doing a review of the superstocks that I have blogged since the start of the year. I am expecting some significant change in the way I trade these superstocks.

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