Merrill Lynch upgraded Emmis Communications (EMMS ) and its peers to buy as part of an improved sector outlook.
Analyst Marc Nabi says the upgrade is based on valuation and an improved outlook for the radio industry. He notes with national advertising being the legs of a current pick-up in radio, he expects large market players to disproportionately benefit during the recovery.
Nabi says Emmis is well positioned to outperform the industry in the near term as its radio division receives about 70% of revenue from the three largest radio markets: New York, Los Angeles, and Chicago. He notes easy comparisons at the radio division, and organic growth from the Austin market. He sees EPS of 25 cents in fiscal year 2004 (February) and 51 cents in fiscal year 2005. He set a $30 price target for fiscal year 2005.