Sinclair Broadcast: Last Dip Was Buying Opportunity, This One May Not Be



  • Sinclair's 2020 operating profit surge was partly COVID-induced, partly election-induced, and partly accounting mirage.
  • The long-term profit run rate, which I previously calculated at $150 million, now appears more like $80 million per year.
  • That is not enough to justify the current share price, even on the dip, let alone a significant upside.
Sinclair Broadcasting In Spotlight After Viral Video Shows Local TV Anchors Reading Identical Script Lambasting Fake News
Photo by Win McNamee/Getty Images News via Getty Images

Sinclair Broadcast Group (NASDAQ:SBGI) has been one of my better investments over the last two years, in both directions. In 2019, I was bearish on the company after its RSN acquisition and saw it go from $66 shortly after the deal closed all the way down to $12 at the heights of the COVID depression. However, I then went long in November as Sinclair continued to hover below $20 despite cutting its exposure to its RSN bet almost in half. The stock shot up to $38, doubling in just four months to just above my price target of $36. Now, it has fallen again back down below $30. I ended my long at $36, should I jump back in now?

I have considered carefully… and decided not to.

To be clear, I did not end my long because I had any insight that an over 20% drop from the peak was coming. I don’t claim to be that insightful. I ended it because Sinclair had reached the target price I set and I didn’t see much further upside in the mid-$30s. Now that it’s below $30 again I might, except that before buying I rechecked my math using Sinclair’s updated numbers, and they didn’t come out as well as they did before.

Wild Gyrations

The story of Sinclair today probably begins with its third-quarter earnings report, which came out just a week after I went bullish. In it, Sinclair took a massive write-down related to its RSNs. So massive, in fact, that after the write-down, in its third-quarter report Sinclair Broadcast Group reported net assets on its balance sheet of negative $1.6 billion.

It’s reading a little better at the moment, at least on paper, as Sinclair reported a $467 million profit in the fourth quarter. Presumably, that’s what’s got those who are still bullish so confident. While some of that was legitimate profit - largely powered by record-breaking political ad spending - a large part of it was a COVID-19 windfall. And even the true profit part represents a once-every-four-years surge that is not big enough to compensate for all the downward pressure in the other three years.


Recent Deals

Interested in advertising your deals? Contact Edwin Warfield.

Connect with these Baltimore Professionals on LinkedIn

  • Edwin Warfield

    Editor in Chief, Warfield Digital

  • Jean Halle

    Independent Consultant

  • Larry Lichtenauer

    President of Lawrence Howard & Associates

  • Newt Fowler

    Partner at Womble Carlyle, LLP

  • David Crowley

    Owner at Develop DC

  • Carolyn Stinson

    Stinson Marketing Group