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Source: Urban One Facebook

Urban One (UONE) Looks Overbought, Wait for Stock to Correct

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May. 21 2021, Published 12:35 p.m. ET

Urban One (UONE) stock rose 59 percent on May 20. The stock rose after the company won a casino project license in Richmond. How’s the company’s outlook? Is it too late to buy UONE stock at these prices? Should investors be cautious?

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Urban One is a multi-media company that mainly targets African-American and urban consumers. As of May 2021, the company owned and operated 63 broadcast stations located in 13 markets in the U.S. The company also owns a minority ownership interest in MGM National Harbor Casino.

too late to buy urban one uone stock
Source: Urban One Facebook
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Urban One is Black-owned.

Urban One is the largest Black-owned media company in the U.S. The company owns and operates media organizations nationwide and is a licensed casino operator in Maryland. Urban One claims that its services reach 82 percent of Black America.

Urban One won Richmond casino license

On May 20, Urban One said that it won a casino project license in Richmond. The company plans to develop and operate a casino resort named ONE Casino + Resort. The estimated cost of the project is $563 million. The resort will feature a 250-room hotel, a spa, a 100,000 square-foot casino floor with 110 table games, and 2,000 slot machines, among others. The casino project is subject to Richmond voters authorizing a referendum that is expected to be held in November 2021.

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What happened to Urban One stock?

Urban One stock gained 59 percent on May 20, but was down in pre-market trading on May 21. The stock fell as investors took profits following UONE’s big gains. The stock had gained significantly after fast-food giant McDonald’s announced that it would raise its national advertising expenditure with Black-owned media businesses to 10 percent from 4 percent between 2021 and 2024. Urban One stock has gained 127 percent YTD and 638 percent over the last year.

Urban One’s stock forecast

Currently, Urban One stock is being tracked by just one Wall Street analyst. The analyst has a buy recommendation with a 12-month average target price for UONE stock of $6.

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Urban One stock is a good investment.

Urban One will likely benefit from McDonald’s higher spending in diverse-owned companies. The Richmond casino will be the first Black-owned casino in the U.S. Urban One owns the cable network TV One, which serves over 59 million households. In the first quarter, the company generated revenues of $91.4 million, which represents a decline of 4 percent YoY.

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On the positive side, Urban One reported a net income of $7,000 in the quarter compared to a net loss of $23.2 million a year ago. Urban One CEO Alfred Liggins III said that the company performed well amid the COVID-19 pandemic. He expects an even better second-quarter performance.

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Urban One stock isn’t a buy now.

Investors need to be cautious while trading in Urban One stock because it's significantly overbought right now. The last time UONE stock was this overbought was in January 2020. Then came a massive sell-off, and there's a risk that it will happen again. Urban One faces a highly leveraged balance sheet and execution risk related to its gaming initiatives.

Good price to buy Urban One stock

If UONE stock corrects about 50 percent from the current levels, it could be worth a look. For now, I would give the stock a miss.

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