- Piper Jaffray is upping their tgt t0 $106 from $88 saying that while Focus Media reported an essentially in-line quarter, with the results aided slightly by lower-than-expected taxes, that performance is nearly immaterial to many investors given the strong outlook that the company projected for 2007, causing the firm to raise their estimates significantly, well above what they expected going into the quarter. The firm is raising their '07 revenue estimates by more than 10%, implying a y/y growth rate of 64% vs. their original 50%. Similarly, PF EPS goes from $2.75 to $2.83.
In Q4, the company continued to execute well, with Framedia slightly stronger than firm's expectations, while other segments were generally in line. Gross margins continued to demonstrate the leverage in the model with 344 bps of q/ q expansion. The highlight of the call, however, was a very aggressive '07 guidance which implies that the company has good visibility into advertising spending budgets in the second half of '07 and is confident about the overall economic climate in China as the Beijing Olympics approach. While the guidance implies a strong second half, which may be concerning to some investors, they note that the company has consistently met or exceeded its guidance.
Focus Media continues to be firm's favorite vehicle to capitalize on the growth of the broader advertising sector in China, especially as the Olympics approach. Reiterates Outperform.
- CIBC notes FMCN reported modestly better 4Q results, exceeding non-GAAP EPS by $0.01 on lower taxes and one-time income. However, as a result of significantly better '07 guidance, they are raising their target to $110, based on 30x revised non-GAAP '08 EPS est.
4Q revenues in line, as higher poster revs partially offset by lower comm network revs., reflecting timing of Channel B signings. However, EBITDA was 6% lower than they expected on higher G&A (incl. some one-time exp). GAAP EPS of $0.55 was $0.01 below firm's est on higher stock-based comp. '07 revenue guidance of $350-$360m above CIBC's $325m and Street's $330m. They are raising '07 non-GAAP EPS to $2.86 from $2.68 vs. guidance of $2.83-$2.90, and increasing '08 to $3.65 from $3.40. Expects positive Street revisions as well, as guidance is $0.20-$0.24 higher than First Call.
Maintains Sector Outperformer rating.
Notablecalls: The stock traded as high as $88 in after market action but was shot down by the shorts as talk of one-time gains helping the qtr started swirling. Also, EBITDA for Q4 was somewhat lower than expectations.
The stock came down to around $85 but bounced a buck shortly after that, ending the day around $86. I suspect that given the strong 07 guidance and positive analyst chatter this AM (think there will be more of it), the stock may be a buy around the $86 level and have a some decent upside.