Jack-
I am very unhappy with this company. It appears that they have made several mistakes in their business, combined with other unlucky happenings. JP Morgan issued a BUY report today on the stock, after it opened down significantly. They say that National Media will earn .20 in the year ended 3/97, .75 in FY98, and .90 in FY99. The analyst says that after this year, the company should get back to 20% annual earnings growth. I do not own the stock for 20% earnings growth. They were growing at 35%. This decreased growth prediction does not thrill me, to say the least. Another analyst, from RPR, this morning cut the stock from its BUY-focus list to market perform. He put a 12 month target on the stock for $10. I think that is why the stock didn't open trading for an hour after the market opened. The stock traded about 2.5 million shares today, closing at $5.75.
You might be wondering what I am going to do now. No, I certainly will not buy anymore. There are some nagging problems I have with the stock. First of all, have you noticed how the stock sells off before news comes out? Just before the company announced the expected loss yesterday, the stock had dropped for a few days. This was much more pronounced in October, when this whole fiasco began. This stock action leads me to believe that people are selling on non-public information, which is quite illegal. At first, the selloff that lowered the stock from 15 to 11 and then to 8 seemed way overdone. But now, it looks like all the sellers had the right idea. I don't like this at all.
My other problem is that I have watched companies announce an imminent loss for a quarter, and then have the loss continue for several quarters. Look at a 50-week chart of Global Village (GVIL). techstocks.com
They had some problems creep into their business, and it turned out that it was taking longer to recover. Now they have much bigger problems, they're restructuring. If you looked at the company 6 months ago, you probably wouldn't have thought there was a potentially terminal problem. Maybe people oversold. It doesn't look like it now. And with National Media, its worse because the stock drops before anyone (or at least most people) knows whats going on.
I'm not saying the company's going to go under, or the stock is heading to $2. But I have seen a situation such as this with other companies snowball until everyone gets screwed.
Most likely, I am going to sell 75% of my holdings in NM. I could definitely use the loss to offset some gains. I'll wait until something decidedly positive happens, and maybe I'll buy more when that happens. I know that the company today does not seem like the company I wanted to invest in, and whenever that happens, it's time to head for the exit. The only problem is that most people left before I did. Oh well. I don't recommend buying the stock now. Not until there is some clarity about future earnings prospects. There may be more lowering of estimates, who knows?
I don't expect much from this stock over the next year. In 1996, NM lost almost 75% of its value. The stock hasn't traded at a full
P/E ratio since the beginning of the year. Now that confidence in the company's earnings is gone (even more gone than they had been), why should it trade up to a P/E of 20 (its projected growth rate, now)?
One more thing, if this announcement was never made (assuming there were no problems to announce), I would have expected the stock to climb in January, due to the end of tax-loss selling. I don't expect much of that now. National Media is damaged goods, in my opinion. Not the company, but the stock. The company might be fine, but the stock is (and has been) lousy. There are other places more worthy of my money.
Best of Luck,
Todd |
