Nexstar Media Group $NXST ( ▼ 1.98% ) is America's largest local TV broadcaster, operating 201 stations across 116 markets and reaching 70% of US households. Trading at ~$196 per share, the company appears significantly undervalued with a fair value estimate of $492 per share (151% upside potential). Despite industry headwinds from cord-cutting and streaming competition, Nexstar generates exceptional cash flows with 20%+ free cash flow margins, driven by a dual revenue model: stable distribution fees from cable companies (54% of revenue) and advertising revenue including lucrative political cycles (45% of revenue). The investment thesis centers on whether this cash cow can generate sufficient returns while managing $6.96 billion in debt and transitioning to digital platforms. At current valuations, investors are essentially paid a 20%+ cash yield to bet that local TV doesn't disappear overnight - a contrarian play with compelling risk-adjusted returns for patient value investors.

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Think of Nexstar Media Group as the Walmart of local television - they've built an empire by being everywhere at once and leveraging massive scale. With 201 TV stations across 116 markets, they're basically the landlord of America's living rooms, collecting rent from both the cable companies that carry their signals and the advertisers who want to reach their audiences.

Nexstar operates a beautifully simple two-sided marketplace:

Side 1: Distribution Revenue (54% of total) ↗️ Cable and satellite companies pay Nexstar monthly fees based on their subscriber counts to carry local TV signals. It's like a subscription service, but instead of Netflix charging you $15/month, Comcast pays Nexstar a few dollars per subscriber per month for the right to include their local news and network programming. These contracts typically last 3-5 years with built-in annual price increases - it's recurring revenue that would make a SaaS CEO jealous.

Side 2: Advertising Revenue (45% of total) Local businesses, national brands, and politicians pay to run commercials during programming. The beauty here is that Nexstar gets paid twice for the same content - once by distributors to carry it, and again by advertisers to interrupt it with commercials. It's like owning a highway and charging both the drivers to use it AND the billboard companies to advertise alongside it.

Local TV Stations: The crown jewels - 201 stations affiliated with major networks (CBS, FOX, NBC, ABC, The CW). These are the local news powerhouses that people actually trust, employing 6,000 journalists who won 494 awards in 2024 alone.

The CW Network: Nexstar owns 77.1% of America's fifth-largest broadcast network. Think of it as their national platform - they've been transforming it from a money-losing teen drama network into a sports-focused, profitable operation.

NewsNation: Their 24/7 cable news network positioning itself as the "unbiased" alternative to Fox News and CNN. It's like being the Switzerland of cable news.

Digital Assets: 138 websites and 229 mobile apps that collectively attract 103 million monthly users ↗️. Not bad for a "traditional" media company.

Nexstar isn't just playing in the local TV sandbox - they've basically bought the entire playground. They're the largest local TV broadcaster in America, and it's not even close.

Direct Competitors:

The Real Competition: The existential threat isn't other TV companies - it's the entire digital ecosystem. Netflix, YouTube, TikTok, and streaming services are stealing eyeballs, while Google and Meta are vacuuming up advertising dollars. It's like being the best horse-and-buggy manufacturer when cars are being invented.

Scale Advantages: Being the biggest affiliate group for each major network gives them serious negotiating power. When you control 70% of TV households, networks need you more than you need them.

Local News Moat: While anyone can stream content, producing quality local news requires boots on the ground, relationships with sources, and significant infrastructure investment. It's hard to disrupt.

Political Advertising Goldmine: Every two years, politicians need to reach voters, and local TV remains the most effective way to do it. Nexstar's geographic footprint covers most competitive political markets.

Wins:

Challenges:

Distribution Revenue: $2.93 billion (54.1%) ↗️ This is the steady, predictable engine. Cable companies pay based on subscriber counts, and while cord-cutting is real, it's happening slowly. Plus, Nexstar negotiates annual price increases that often offset subscriber losses. It's like having a rent-stabilized apartment in Manhattan - the rent keeps going up even if the neighborhood changes.

Advertising Revenue: $2.42 billion (44.7%) The more volatile but potentially lucrative engine. This includes:

Here's where it gets interesting: In 2024, political advertising represented 20.3% of total ad revenue. That's roughly $490 million just from politicians trying to convince people to vote for them. This creates a predictable two-year cycle where even-numbered years (election years) are significantly more profitable than odd years.

Based on our discounted cash flow analysis, Nexstar appears to be significantly undervalued at its current level of around $196 per share (as of November 11, 2025).

Fair Value Range:

What's Working in Nexstar's Favor:

The Discount Factors:

The current low valuation suggests investors are pricing in significant secular decline. They're essentially betting that cord-cutting will accelerate and advertising will migrate entirely to digital platforms. While these are real risks, the market may be overly pessimistic about Nexstar's ability to adapt and maintain cash generation.

Core Beliefs for Success:

Critical Risks and Challenges:

Nexstar represents a classic value trap vs. value opportunity debate. The company generates enormous cash flows from assets that many consider obsolete, but those cash flows remain remarkably resilient.

The Investment Thesis: At current valuations, you're essentially getting paid a 20%+ cash yield to bet that local TV doesn't disappear overnight. Even if the business slowly declines, the combination of strong cash generation, debt reduction, and potential digital upside could generate attractive returns.

The Risk: You're betting against the tide of technological change in an industry that's clearly in secular decline. If cord-cutting accelerates or advertising migration happens faster than expected, even the attractive current valuation might not provide adequate downside protection.

Bottom Line: Nexstar isn't a growth story - it's a cash cow in a declining industry with smart management trying to milk every dollar while transitioning to digital. For investors comfortable with cyclical, cash-generative businesses trading at deep discounts, it's worth serious consideration. Just don't expect it to be the next Netflix.

The key question isn't whether traditional TV will eventually decline - it's whether Nexstar can generate enough cash along the way to reward patient investors. At current prices, the odds look surprisingly favorable. 📺💰

AI-written, human-approved

Disclaimer: This guide is for informational purposes only and does not constitute financial advice, investment recommendations, or an offer or solicitation to buy or sell any securities. The information contained in this report has been obtained from sources believed to be reliable, but StrataFinance does not guarantee its accuracy, completeness, or timeliness.