Is E.W. Scripps (SSP) a Buy After a Q2 Earnings Disaster? Assessing the Selloff in a Transforming Media Landscape

The selloff of E.W. Scripps (NASDAQ: SSP) in July 2025—triggered by a disastrous Q2 earnings report—has left the stock trading at a 38.7% discount to its 52-week high. With a GAAP loss of $0.59 per share and revenue declining 5.8% year-over-year, investors are asking: Is this a buying opportunity, or a warning sign for a struggling media giant? To answer this, we must dissect the company's financial struggles, strategic pivots, and the broader industry forces reshaping its business model.

The Q2 Earnings Disaster: A Closer Look

Scripps' Q2 results were a mixed bag of short-term pain and long-term potential. Revenue fell to $540 million, driven by a 8.3% drop in the Local Media division, where political advertising—a cyclical revenue driver—collapsed to $2.6 million from $28.2 million in the prior-year period. The Networks division, however, showed resilience, with a 57% surge in connected TV (CTV) revenue and a 9-point margin improvement to 27%. This growth was fueled by WNBA and NWSL programming on ION and streaming platforms, which commanded premium ad rates.

The company's debt refinancing efforts—raising $750 million in new senior secured notes—were a silver lining. By retiring short-term debt and extending maturities, Scripps reduced its net leverage ratio to 4.4x, down from 4.9x in Q1. Yet, the refinancing came with a 9.875% interest rate, locking in high borrowing costs that will weigh on future earnings.

Navigating a Shifting Media Landscape

The broader media industry is in flux, with linear TV losing ground to streaming and CTV. Scripps' 57% CTV revenue growth in Q2 highlights its ability to adapt. The company's focus on women's sports—a niche with untapped advertising potential—has proven lucrative. The WNBA and NWSL's “franchise nights” on ION, for instance, generated premium ad rates, while the NBA and NHL playoffs contributed over $7 million in revenue.

However, the company's reliance on sports programming is a double-edged sword. While it differentiates Scripps in a soft advertising market, it also exposes it to the volatility of live sports rights and viewer engagement. For example, the absence of a major sports event in Q3 could exacerbate the expected 20%–25% revenue decline in the Local Media division.

Credit Risk and Analyst Sentiment: A Cautionary Tale

Scripps' credit rating has deteriorated to C1-C2, with a default probability of 7.53%—a stark contrast to its stable B2-B3 ratings in 2021–2022. This downgrade reflects both internal struggles (integration challenges from the Ion Media acquisition) and external pressures (rising interest rates and declining ad spend). Despite these risks, analysts remain split. Four Wall Street analysts assigned a “Moderate Buy” rating, with price targets ranging from $4.00 to $10.00, averaging $7.33—a 144% upside from the July 2025 closing price of $2.68.

The stock's volatility—92 price moves of over 5% in the past year—suggests a high-risk, high-reward profile. While the current price of $2.68 trades at just 0.27 times book value, the company's path to profitability remains uncertain. Management's focus on deleveraging and portfolio optimization (e.g., the Gray Television station swap) could unlock value, but execution risks persist.

Strategic Entry Point or Value Trap?

For long-term investors, the key question is whether Scripps' strategic moves—streaming growth, sports rights, and debt management—can offset its near-term challenges. The company's Q2 results underscore its ability to innovate in CTV and leverage sports as a differentiator. However, its high leverage, declining core ad revenue, and dependence on political advertising in election years remain significant headwinds.

The selloff has priced in many of these risks, but it has also created an opportunity to assess the company's long-term potential. If Scripps can maintain its CTV momentum, capitalize on the WNBA/NWSL growth, and execute its debt reduction plan, the stock could rebound. Conversely, a failure to adapt to AI-driven ad spending or a slowdown in sports monetization could deepen the crisis.

Investment Thesis

Buy for:
- Undervalued stock at 0.27x book value.
- Strong CTV and streaming growth (57% Q2 increase).
- Strategic diversification into women's sports and sports rights.
- Debt refinancing and leverage reduction.

Hold for:
- High default risk (7.53% probability).
- Uncertain advertising recovery in a weak macro environment.
- Execution risks in portfolio optimization and station swaps.

Sell for:
- Persistent profitability challenges and declining core ad revenue.
- Elevated interest rates and refinancing costs.

Conclusion

E.W. Scripps' Q2 earnings disaster has exposed vulnerabilities but also highlighted its strategic agility in a transforming media landscape. While the selloff has priced in significant pessimism, the company's focus on CTV, sports, and debt management offers a path to recovery. For risk-tolerant investors, the current valuation may represent a strategic entry point—but only if they are prepared to weather further volatility and monitor the company's progress in deleveraging and monetizing its digital assets.