Why Gray Media Stock Slumped by Nearly 3% Today

An analyst's price-target cut was the news dinging Gray Media (NYSE: GTN) stock on the second trading day of the week. Even though that reduction wasn't dramatic, it nevertheless affected sentiment on Gray, and its share price dipped by almost 3%. That was a steeper fall than the S&P 500 index's 0.8% Tuesday decline.

The one-dollar difference

The pundit behind the cut was Benchmark's Daniel Kurnos, who now feels Gray is worth $7 per share rather than the $8 he previously estimated. The analyst maintained his existing buy recommendation on the stock despite the move.

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According to reports, Kurnos' move was based on the possibility of a recession in this country. Many economists, analysts, and investors are worried about this given the current tariff war and its effect on prices for a range of goods.

In Kurnos' view, Gray is better positioned than other media companies to withstand a shaky economy, as it has significantly higher exposure to local markets than its rivals. Nationwide broadcasters could suffer from a slowdown in ad spending by larger companies seeking to appeal to broad audiences.

Strategic alternatives a possibility?

Kurnos did express concern that current CEO Hilton Howell is apparently unwilling to sell Gray, a factor that keeps speculative investors at bay. Yet he opined that the company could consider strategic alternatives such as a merger of some sort.

Personally, I don't feel Gray's performance has been consistent and compelling enough to make it a clear buy as a stock, although it's somewhat of an offbeat company in its sector. Some investors might indeed like that local exposure as a hedge against a wider economic slump.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.