div style=”text-align: justify;”JP Morgan is out with a significant call onspan style=”font-weight: bold;” Arbitron (NYSE:ARB)/span upgrading their rating to Overweight from Neutral with a $21 tgt.br /br /span style=”font-weight: bold;”JPM believes the main overhang to the stock may be removed in coming weeks if its largest client, Clear Channel, renews its contract with the company for its smaller diary markets./span Clear Channel’s contract expired in December for the non-PPM markets (they estimate this business represents approx. 5-6% of ARB revenues) and is expected to make a decision on renewal before the April ratings book is released.br /br /span style=”font-weight: bold;”Potential Nielsen threat has been a significant overhang to shares./span Nielsen’s surprise entry into the radio market late last year hit Arbitron’s stock hard (shares are down more than 40% since the news) as concern spread that Nielsen would go beyond the smaller ratings markets it snatched up and encroach upon other Arbitron revenues. With the diary contract for Arbitron’s largest client, Clear Channel, currently up for renewal, the firm expects to receive more clarity in coming weeks if this threat is real.br /br /span style=”font-weight: bold;”They believe a contract renewal with Clear Channel is likely. /spanThey believe it is unlikely Clear Channel will move business to Nielsen at this time and therefore believe a renewal with Arbitron is likely. Given already good growth prospects at Arbitron from the rollout of its PPM technology in large markets, the removal of this risk could result in meaningful multiple expansion, more reflective of JPM’s projected ~20% EPS CAGR over the next five years.br /br /span style=”font-weight: bold;”Compelling valuation./span At 5x 09 EBTIDA or 9x EPS, ARB shares have fallen dramatically from their historical averages and from last fall before the Nielsen threat (trading then at 14x EPS). Given the strong earnings profile and good visibility in this business, they would assume the stock would return to at least a market multiple if this overhang disappeared, suggesting 11x 2010 EPS or a $21 stock price, representing significant upside potential to the risk-tolerant investor.br /br /span style=”color: rgb(255, 0, 0);”Notablecalls: /spanFirst of all, I’m calling this one ACTIONABLE LONG. Here’s why:br /br /- It was JP Morgan that downgraded the stock back in Nov 2008 on same concerns (Clear Channel/Nielsen) they are refuting today.br /br /- The stock has been absolutely trashed, down around 6-7 pts since the downgrade (initial reaction was 10 pts)br /br /- While the rest of the mkt seems to have put together a nice bounce, ARB has been lagging badly. Kind of similar situation to span style=”font-weight: bold;”CB Richard Ellis (NYSE:CBG)/span couple of days ago. Not saying we are going to see a similar 50% upside move in ARB but the stock will see some serious upside in the n-t.br /br /span style=”font-weight: bold;”Waterpistol to the head – ARB can do $16 in the n-t./span/divdiv class=”blogger-post-footer”img width=’1′ height=’1′ src=’http://res1.blogblog.com/tracker/29297569-8773240733509324770?l=notablecalls.blogspot.com’//div

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