GMST ( -10 @ $40) shares plummet after report
PASADENA, Calif. (CBS.MW) -- Shares of Gemstar-TV Guide International Inc. dropped more than 23 percent Tuesday following a Monday earnings report that was short on guidance for Wall Street.
Shares of the technology and media concern were down by more than $13 before closing at $44.69, down $10. Its stock dropped even though Gemstar's (GMST: news, msgs) earnings report for the second quarter ended Sept. 30 wasn't that negative.
Its merger with TV Guide, accomplished during the quarter, altered the earnings picture since results from the acquired company were included. But the combined company showed a near doubling sequentially in earnings growth.
The trouble for Gemstar came from the company's lack of guidance for Wall Street, both in its earnings statement and in the conference call with analysts afterward.
"There's some level of frustration," said Rob Stone, analyst for SG Cowen Securities. "The company had promised to give guidance, and they didn't."
Stone said there are encouraging signs emanating from the company. Gemstar may be making a number of deals, which it may prefer not to discuss because that could backfire.
But the company had promised a forward-looking statement several weeks prior to the earnings release, Stone said.
Gemstar officials could not be reached for comment.
Pro forma revenue for the company was $337.7 million, a slight drop from the prior year's quarter of less than 1 percent, the company said. Pro forma earnings per share before interest, taxes, depreciation and amortization were 24 cents, compared with 19 cents the prior year.
CIBC World Markets downgraded Gemstar's stock based on concerns over the company's interactive television guides.
"It is developing more slowly that we had anticipated," said CIBC analyst John Corcoran, speaking of the technology for the guides. Corcoran said the subscriber base, a combined 8.5 million for both the Gemstar and TV Guide versions, is at the anticipated level.
He added it is difficult to valuate the company's shares, leading to further questions about the stock. Gemstar's pre-tax earnings, though, appeared to be on target, Corcoran said.
But Robertson Stephens issued a report that maintained a "strong buy" rating on the company.
Analysts Lowell Singer and Michael Graham said a number of deals, including the recent settlement of litigation with Motorola Inc. (MOT: news, msgs) regarding program guide patents, could boost the company's shares. Motorola also agreed to use Gemstar's program guides.
"We believe the Motorola deal further strengthens Gemstar's patent position and its leverage in pursuing deals with cable (operators)," the analysts' report said. |
