Summary
- Sinclair's RSN assets have been left for dead way too soon.
- Even if the regional sports segment blows up, the value in Sinclair's local news business has seen a resurgence.
- Looking at short interest and share availability, "sell Sinclair" might be a one-sided trade.
This is my third article covering Sinclair Broadcast Group (SBGI). The first two have not aged well. Actually, that might be an understatement. The thesis of my first piece was fairly simple. Back in November, I thought the company would benefit from strong advertising boosts generated from political revenue and from Fox owning the Super Bowl in 2020. Though I still believe that reasoning was originally sound, given the economic devastation from COVID-19, I no longer view advertising revenue to be better than expectations in 2020. In all likelihood, advertising will actually miss pre-COVID-19 guidance. My follow-up article was centered largely around two points. The first point being Sinclair's selloff was simply overdone. Turns out that was wrong. The second point was valuation compared to peers. This point depends entirely on how you value Sinclair's regional sports networks.
The only other Seeking Alpha contributor who has covered Sinclair in the last 9 months is Max Greve. Despite not actually having a position, Max dropped three Sinclair articles in the month of March alone. The most recent of which was seemingly in direct response to my assertion that a company trading at a market cap valued lower than cash on the books was a preposterous market irrationality. Though I recommend reading the article, I'd argue some of the best information can actually be found in the comments from Jesse Peterson. I love that Max and I disagree on this name because I genuinely value Max's opinion and the last thing I want to do is live in an echo chamber as an investor. We just don't agree on this name.
Pro leagues aren't taking back rights any time soon
DTC is undeniably the trend in media. We see it with all the big players in broadcast. ViacomCBS (VIAC) has CBS All-Access, AT&T (T) owned HBO Max goes live in May, and Comcast (CMCSA) is launching Peacock nationwide in July. It is very clear what is happening in the streaming space. If you own content, you benefit from transitioning to a direct to consumer model. This is actually a fundamental point in my investment strategy. And it works if your core competency as a business is media. If your core competency is baseball games, it might make more sense to leave the production of the media product to the professionals.
