Nexstar Media: Riding Regulatory Deregulation and Political Ad Growth to Dominance

The Federal Communications Commission’s (FCC) regulatory overhaul, accelerated by the April 2025 executive order to eliminate outdated rules, is unlocking a once-in-a-decade opportunity for media conglomerates like Nexstar Media (NXST). With the 39% national ownership cap and local duopoly restrictions under threat, Nexstar is poised to capitalize on M&A-driven growth, amplify its distribution resilience, and capture a surge in political ad spending ahead of the 2026 midterm elections. This confluence of structural shifts and near-term catalysts justifies a Strong Buy rating for investors.

Regulatory Tailwinds: Breaking Free of the 39% Ceiling

The FCC’s 39% national ownership cap, a relic of the analog era, has long constrained Nexstar’s ability to acquire stations beyond 39% of U.S. households. The April 2025 executive order, which prioritized deregulation to boost competition, has reignited debates over this rule. The National Association of Broadcasters (NAB) has formally petitioned the FCC to eliminate the cap, arguing it stifles competition against unregulated tech giants like Meta and Amazon. If successful, Nexstar—a current owner of 196 stations—could acquire additional stations in markets where it previously hit regulatory barriers, such as Texas and Florida.

This expansion would directly boost retransmission fee revenue, which accounts for 63% of Nexstar’s total revenue. With fewer ownership restrictions, the company could negotiate higher fees from multichannel video programming distributors (MVPDs) like DISH Network and DirecTV, leveraging its expanded reach. The duopoly rule, which bars owning more than one top-four station in a market, is also under scrutiny. Removing it would allow Nexstar to consolidate stations in key markets, reducing operational costs and enhancing pricing power.

Political Ad Growth: A 2026 Catalyst Worth $1 Billion

The 2026 midterm election cycle promises a $1.2 billion boost to Nexstar’s top line, per estimates from the NAB. Political advertising typically accounts for 10-15% of annual ad revenue for broadcast networks, but midterms historically see a 50-100% spike. Nexstar’s network of local stations—geared toward conservative-leaning demographics in battleground states—positions it to capture a disproportionate share of this surge.

The CW Network, which Nexstar co-owns, further amplifies its appeal. Its recent expansion into live sports programming, including NFL games and college athletics, will attract younger audiences and advertisers, diversifying revenue streams. This synergy between local news dominance and national sports content creates a dual revenue engine that few peers can match.

Valuation: A Discounted Opportunity

Nexstar’s current valuation reflects undervalued growth prospects. At a P/E ratio of 12x (vs. the S&P 500’s 21x), the stock trades at a 43% discount to its five-year average. Meanwhile, its debt-to-EBITDA ratio of 3.2x—well below peers like Sinclair Broadcast Group (4.5x)—provides flexibility for acquisitions. The removal of ownership caps could unlock $2-3 billion in incremental enterprise value through station purchases, while 2026’s ad boom offers a near-term earnings catalyst.

Risks and Considerations

Opposition from MVPDs and public advocacy groups could delay FCC rule changes. However, the April 2025 executive order creates a regulatory urgency that favors swift action. Risks also include overvaluation of political ad demand and competition from streaming platforms, but Nexstar’s local news dominance and CW’s sports content buffer these threats.

Conclusion: Act Now Before the Rally Begins

Nexstar is uniquely positioned to capitalize on two transformative trends: FCC deregulation and the 2026 political ad boom. With $2 billion in potential M&A value and a $1 billion earnings catalyst, the stock is primed for a multiyear outperformance cycle. Investors who wait risk missing the rally. Strong Buy with a 12-month target of $45—a 40% upside from current levels.

The regulatory tailwinds are here. The catalysts are clear. The time to act is now.