Sell Clear Channel Outdoor, Says Loop Capital

Loop Capital’s David W. Miller believes that with a majority of Clear Channel Outdoor Holdings, Inc. CCO being owned by private equity and with the float being thin, the company’s structure is “fundamentally flawed as a stub equity piece.”

Miller initiated coverage of the company with a Sell rating and price target of $5.50.

Sell Clear Channel

Miller recommends that Clear Channel investors sell their shares and use the proceeds to accumulate Lamar Advertising Co LAMR, which the analyst believes is the highest quality name in the space.

Related Link: Loop Capital Initiates Outfront Media At Hold, Advises To Avoid "Sloppy" Earnings

The analyst pointed out that while investors might look at Lamar Advertising as a pure “domestic” play and Clear Channel as being a more “global” play, the differences between the two companies go far beyond this.

Differences Between Lamar And Clear Channel

First, Lamar Advertising is a stand-alone enterprise, while Clear Channel is 88 percent owned by iHeartMedia Inc IHRT, which in turn is majority owned by private equity.

“Because the IHRT capital structure is so highly levered, free cash flow is marginalized, which in turn, does not allow CCO the freedom in investing in digital boards in a manner that is accretive to FCF,” Miller noted.

Another key difference between the two companies is their asset make-up.

The analyst also expressed concerns regarding Clear Channel’s transportation business, while pointing out that there also was significant conflict of interest since it was majority owned by a company focused on terrestrial radio.

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Posted In: David W. MillerLoop Capital MarketsAnalyst ColorShort IdeasInitiationAnalyst RatingsTrading Ideas