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Why Entercom Communications Stock Is Soaring 20% Today

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

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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.

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