Gray Media (GTN): A Discounted Play on Broadcast Turnaround

Gray Media (NASDAQ: GTN) has emerged as a compelling contrarian opportunity in the broadcast sector, trading at valuation multiples that defy its long-term growth potential. With a Zacks Rank #2 (Buy) upgrade, a Zacks Value Grade “A,” and a projected earnings rebound in 2026, the stock offers a rare blend of undervaluation and turnaround potential. Let's dissect the case for GTN as a discounted play on the revival of traditional broadcasting.

Valuation: A Bargain at Near-Decade Lows

Gray Media's stock is priced at historic lows relative to its peers and intrinsic value. As of June 19, 2025, the stock closed at $4.15, with a market cap of $420.88 million. Its trailing P/E of 2.89 and forward P/E of 1.51 are near decade lows, far below the industry average of 27.99. For context, peers like Sinclair Broadcast Group (SBGI) and Tegna (TGNA) trade at forward P/E multiples of 6.5 and 7.3, respectively.

The Zacks Value Grade “A” underscores this undervaluation, signaling that GTN is trading well below its intrinsic worth. Key drivers of this discount include near-term challenges like FY2025's projected $0.71 EPS loss and sector-wide headwinds from streaming competition. However, these factors are already priced into the stock, creating a floor for further downside.

Earnings Catalysts: A Turnaround on the Horizon

The real story lies in Gray Media's FY2026 earnings rebound, where consensus estimates project an EPS of $3.14—a 542% increase from FY2025's losses. This turnaround hinges on three key factors:

1. Political Ad Revenue Surge: The 2026 midterms will boost political ad spending, mirroring the tailwind seen in Q3 2024 during the 2024 election cycle. Gray's local news stations are prime destinations for political advertisers, positioning the company to capture this revenue surge.
2. Cost Discipline and Leverage Improvements: Management has already achieved $30 million in annualized cost savings, reducing the leverage ratio to 3.5x EBITDA (down from 4.2x in 2023). This deleveraging reduces refinancing risks and strengthens financial flexibility.
3. Share Buybacks: With $50 million remaining in its repurchase program, the company can further support valuation multiples if earnings improve.

The Q1 2025 earnings beat (EPS of $0.79 vs. estimates of $0.54) demonstrated the company's operational resilience. Historical data shows that such earnings surprises have historically driven a 2.5% stock gain over 30 days, suggesting further upside if momentum continues.

Near-Term Risks: Navigating FY2025 Challenges

GTN is not without risks. The company faces a projected 12.95% revenue decline in FY2025 to $3.17 billion, driven by softness in local advertising. Near-term execution risks are elevated, as the FY2026 rebound depends on:
- A recovery in core advertising revenue (+14.8% projected in 2026).
- Political ad tailwinds materializing as expected.
- Cost savings translating into improved margins.

The broadcast TV sector also faces broader headwinds, including ad tech shifts and streaming competition. However, Gray's focus on local news dominance—a trusted content category—offers a competitive moat.

Investment Thesis: A Contrarian Play with High Upside

Gray Media's Zacks Rank #2 (Buy) reflects improving analyst sentiment and the potential for a valuation reset if FY2026 earnings materialize. The stock's current price of $4.15 is below its $5.10 average target, suggesting upside potential. Key catalysts include:
- Q2 2025 Earnings: Due by August 2025, these results will provide clarity on cost savings, ad recovery, and political ad pipeline.
- Political Ad Momentum: Tracking the 2026 midterm ad cycle's impact on Q3 and Q4 results.

Recommendation: Accumulate Below $4.00

The data supports accumulating Gray Media shares below $4.00, with a 12–18 month horizon, to capture the turnaround potential. The Zacks Value Grade “A” and near-decade-low multiples act as a safety net against further downside. Investors should prioritize patience, as the stock's success hinges on execution in 2025 and 2026.

Final Thoughts

Gray Media is a classic contrarian play: a deeply discounted stock with a catalyst-driven path to normalization. While risks are present, the reward-to-risk ratio is compelling for investors willing to look past near-term losses and focus on the $3.14 EPS rebound in 2026. Monitor Q2 earnings and ad market trends closely, but don't let short-term volatility obscure the bigger picture—a valuation reset could be just around the corner.

Disclosure: This analysis is for informational purposes only. Always consult a licensed financial advisor before making investment decisions.