Booming broadcast stox draw warning

Wary investors watch rally closely

Broadcast stocks have rallied sharply in recent months — so sharply that some on Wall Street are warning investors to step back.

The shares have been buoyed by a brighter economic outlook and looser federal rules on media ownership that promise a new round of mergers. But Salomon Smith Barney analyst Niraj Gupta said Friday that most of the good news is already in the stocks, which means limited upside.

On the downside

He lowered his investment ratings on radio giant Clear Channel Communications, Spanish-lingo TV and radio broadcasters Univision and Entravision, radio concern Regent Communications and billboard group Lamar Advertising. The shares all closed lower Friday in a down market. Broader entertainment stocks like Walt Disney, AOL Time Warner, Vivendi, Viacom and Fox also eased, in spite of the Oscar buzz.

“Media stocks have appreciated meaningfully from September levels in anticipation of an economic rebound,” Gupta wrote in a note to investors.

The average media stock is up 18% since Sept. 10 vs. 6% and 10% increases for S&P and Nasdaq, respectively. Hispanic media stocks have surged 68%, and radio and outdoor advertising stocks have jumped a whopping 50% in the same period.

Broadcaster stocks are said to be a barometer of the broader economy — they tend to be among the first to fall when economic growth slows, and they rebound early.

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