Please ensure Javascript is enabled for purposes of website accessibility

Why Entercom Communications Stock Is Soaring 20% Today

By Rich Duprey - May 21, 2020 at 11:38AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The market was reacting strongly to a bullish signal the radio broadcaster was given.

What happened

Shares of Entercom Communications (ETM -2.52%) are soaring in morning trading after the radio broadcaster said its chairman emeritus had scooped up 1.2 million shares of the company's outstanding stock at prices ranging from $1.20 to $1.45 per share.

So what

Insider buys are often perceived by the market as bullish signals, and the purchases by Joseph Field amounted to approximately 1% of Entercom's float. Field now owns approximately 11% of the broadcaster's outstanding stock, or about 15.1 million shares. 

Radio microphone and "on air" sign in a studio

Image source: Getty Images.

Now what

With the stock having closed at $1.43 per share yesterday, the purchase caused them to soar 20% to $1.72 per share.

While the vote of confidence is driving investor enthusiasm, there are concerns about the effect the COVID-19 pandemic will have on the business. Radio is reportedly seeing declines in ad spend ranging between 40% and 70%, and in its earnings report last week, Entercom noted that where its revenue had been up 7% in the quarter prior to the coronavirus outbreak, it subsequently ended down 4%.

It also drew down the entirety of its revolving credit line, giving it $1.8 billion in long-term debt and just $189 million in cash.

Rich Duprey 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Entercom Communications Corp. Stock Quote
Entercom Communications Corp.
ETM
$0.71 (-2.52%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
403%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.