follow me on Twitter
« Dreamworks Thesis Falls Apart | Main | August 2008 Model Signals »
July 31, 2008
Good Results, Bad Trading at CETV
I am working a longer comment on CETV, probably to be posted on Monday, but given the crazy trading following yesterday's earnings report and conference call I wanted to offer some brief insights.
The quarter was good, better than consensus and matching the very highest estimates which included my own. Romania and Croatia were across the board stars. The Czech Republic has incredible margin performance. Slovenia was good. Slovakia was fine after considering purposeful revenue shifts between 1Q and 2Q. Ukraine was weak as I had expected but several analysts were disappointed. The company provided detailed five year guidance for Ukraine now that is fully controls the station which makes current year results less important. The guidance was more than twice what I expected in 2011-2013. Overall guidance was maintained even as Ukraine's 2008 forecast came down and losses from the newly acquired Bulgarian stations were incorporated. I still think guidance remains low and will be raised at the October analyst meeting in NY.
Given this news and heavy selling in the stock since mid-June, it is not surprising that the shares opened up more than $4 and still had a $3 gain when the conference call ended at 11:30 ET. From that point on however, it s was straight downhill with acceleration into the close ending with a $4 loss. The shares are deservedly rebounding by a couple of bucks today in early trading....
....As far as I can tell, the trading was mostly technical in nature as once selling reversed the early gains it built upon itself and the stock became easy prey as the reversal could easily lead to a "something is wrong" spin from traders. Plenty of calls and emails offered various explanations mostly surrounding the company's recently announced entrance into Bulgaria. Some said they overpaid. Others said they will still look to buy the #1 station in the market and will overpay and issue equity. No one was saying anything about fundamentals of the business.
My Monday column will review why I think CETV is the best idea in media for anyone with a time horizon beyond a trade. I think it is oversold short-term as well but I understand the malaise that is crushing valuations of all media stocks is making it difficult for even the best one.
Posted by Steve Birenberg at July 31, 2008 08:51 AM in CETV
1.OUR COMPANIES[CETV,MICC ETC] ARE DOING EXCEPTIONALLY WELL.THEIR STOCKS ARE DOING EXTREMELY POORLY AS REFLECTIVE OF THE MARKET OVERALL.
2.TO AMATEURS,IT APPEARS AS IF CETV AND MICC MAY HAVE BEEN TARGETED BY UNCALLED FOR SHORT SELLING. THE MARKET IN GENERAL SEEMS NO CLOSER TO A REAL BOTTOM. THE MARKET SEEMS TO BE POISONED BY BOTH FUNDAMENTAL AND SERIOUS TECHNICAL PROBLEMS[E.G LACK OF UPTICK RULE AND ? NAKED SHORT SELLING].
3.DO YOU THINK THE OVERALL MARKET WILL START HEALING WITHIN THE NEXT 6 MONTHS? DO YOU BELIEVE THE AGRESSIVE SHORT SELLING ON EXCELLENT
COMPANIES WILL END ALSO WITHIN THE NEXT 6 MONTHS OR MUST THE MARKET REGULATIONS BE FIXED FIRST?
4 ON MY BLOCK, TO THE AMATEUR INVESTOR, IT APPEARS AS IF THE MARKET DOES NOT WORK ANY MORE FOR THE"LITTLE GUY" AND THAT THIS IS MORE THAN THE NORMAL RECESSION/BEAR MARKET.
I don't really have much to add. I do think the market has some structural problems but I am not a believer in a conspiracy of shorts for CETV and MICC. There are reasons to dislike these stocks based on macro considerations in emerging markets. Those reason will be proved wrong but in a bear market they are a lot more influential.
I do think the market will come out of it within the next six months as the economy stabilizes and optimism returns. I'm still worried though about getting form today to that point as a much worse economy and market is plausible.
Posted by: Steve at August 1, 2008 03:23 PM