Take it Private! is a new series looking at one company each week that, in my opinion, has no reason for being public. To find these companies, I screen for the following:
High insider ownership
A history of solid profitability
A paltry Price/Earnings and/or Price/Cash Flow multiple, and a reasonable Price/Book ratio.
A stagnant stock price accompanied by low volume indicating a lack of interest in the stock
My purpose in highlighting these companies? This screen can be a good way to find deep value stocks, especially companies that may be attractive to a strategic buyer, private equity firm or management-led buyout at a premium to the current share price. However, this profile should not be interpreted as a recommendation to buy shares in Playboy Enterprises (NYSE: PLA).
Steven Mallas recently asked What happened to Playboy stock?, and referring to the company's tanking stock price and operational problems wrote that he'd "love to be invited for an extended stay at the Playboy mansion so that I could help solve the company's problems "
I have to admit, I completely missed this move. I usually keep tabs on Playboy (NYSE: PLA)'s stock action. Not very close tabs, truthfully, but I do check in somewhat regularly. I was shocked when I saw how low the stock had recently dropped. Back in the first week of May, when I reported on the adult-entertainment entity's earnings, the stock was trading around $7.25. As of Thursday's close, the stock was priced at $5.85 per share. The 52-week low now stands at $5.52. TheStreet.com recently cursed the stock to sell status.
That's a steep move in such a short period of time, and now I have to ask myself: Is the stock a trade? I mean, a thought that immediately came to my mind upon seeing the current share price was that the Wall Street movers and shakers may have overshot on the selling here.
But then, other thoughts came to mind such as how badly the company has been doing. Also, as Zac Bissonnette recently pointed out, pornography isn't really recession-proof at all in this age of the Internet. Seekers of adult entertainment have seen their wallets benefit from the proliferation of the clip culture as expressed by sites like YouTube and its more porn-friendly counterparts.
The conventional wisdom is that purveyors of pornography do well in soft economies. When people are unemployed and high gas prices make travel and dinners out expensive, many men choose to stay home with a good book and a pretty girl.
But that hasn't been the case lately. In this weak economy, pornography stocks have been terrible performers. Playboy (NYSE: PLA) reported lousy first quarter results, and its stock has taken a beating so far this year. Shares of New Frontier Media (NASDAQ: NOOF) are down nearly 30% today after that company reported lackluster fourth quarter and full-year results.
So what gives? Have men lost their appetite for pornography, and are now spending their free time doing crosswords and watching The Discovery Channel?
Playboy's (NYSE: PLA) shares are hovering near a 52-week low as I write this. The catalyst, you ask? The sexy company reported some dismal earnings this week. Net sales decreased 8%. The net loss came in at $0.09 per diluted share versus positive net income of $0.04 per diluted share in the previous year's quarter.
Even if you look at some of the adjustments, the Playboy story just isn't a seductive one. And according to a Reuters article, expectations were for a profit of $0.06 per share after adjustments. The net income of each Playboy operating division headed in a downward direction. And publishing, well -- that's been the saddest segment of all for a while now.
I have a question for Christie Hefner: Are you serious about turning your father's company around? Seriously. I've been giving Playboy the benefit of the doubt now for quite some time, and I'm not sure I can do that anymore. I want to, believe me; I'm a guy who has always been in love with the Playboy lifestyle. And, remember, the invitation is always open if you need me to come over to the Mansion to help you generate some new marketing strategies.
Sirius Satellite Radio (NASDAQ: SIRI) reported Q4 and full-year earnings this morning, and I have to say that the company, led by the famous and highly-respected CEO Mel Karmazin, tuned into some good numbers. Revenues for the fourth quarter increased 29%; for the full fiscal year, revenues jumped 45%. The net diluted loss narrowed during the quarter to $0.11 per share versus $0.17 per share in the year-ago period, and for the year, it improved to $0.39 versus $0.79.
Perhaps the best news in the earnings release is the cash-flow situation. The company's free cash flow more than doubled for Q4, coming in at $75.9 million. And, hey, it was positive, which is important to note, since this company has sacrificed free cash over the years to invest in its platform. In fact, management noted that, for the first time, the second half of the year saw positive free cash flow (equal to $8.1 million for the period). And subscriber growth was impressive -- the company gained almost 2.3 million listeners, and it ended the year with 8.3 million subscribers. People gravitate toward the various popular brands featured on the platform, which includes shows by Playboy (NYSE: PLA), Jamie Foxx, and, of course, the king of all media past, present, and future, Howard Stern. There's also a lot of sports programming to add value for subscribers, as well as an upcoming slate of health programming called "Doctor Radio."
So, why does the stock trade in the low single digits? Why is it priced so speculatively? For one thing, there is the merger issue with XM Satellite Radio (NASDAQ: XMSR). Until that goes through, investors will have to wait for further guidance on the combination of the two platforms. Also, the market is going to want to see some consistent reports of positive net income on a GAAP basis to become really excited. I like the numbers currently associated with Sirius, and I think it may offer some upside potential for risk capital. As for myself? I'm not inclined to play it just yet. I'd rather see some technical strength assert itself before jumping in.
The dysfunctional state of the mainstream magazine industry is apparently not enough to dissuade the purveyors of the Girls Gone Wild video franchise from flashing the newsstand. According to Nate Ives of Advertising Age, Girls Gone Wild magazine will soon hit the streets with $9.99 worth of exuberant exhibitionism. Should Playboy (NYSE: PLA) worry?
I'm not particularly savvy on the magazine business, but I think I have the profit model here figured out. Girls Gone Wild haunts the spring break spots, enticing drunken college girls to bare their breasts and more for the camera, and hawks the videos on late night television.
Now, thousands of parents each year are suckered into buying those high school Who's Who books for the pleasure of proving to their relatives that their sons are not losers after all. Is it so hard to believe that the same parent wouldn't pony up a sawbuck for a picture of their daughter at her youthful peak of ripeness? I can imagine the magazine being proudly passed around at the family reunion, after the macaroni salad, before the softball game. "Gosh, is that really Nellie Sue?" says Aunt Jean. "That must have hurt," opines cousin Delores. "Let me borrow that for a minute," says young cousin Carl. "I'll bring it right back."
Yeah, parental pride is sure to lead to the success of the Girls Gone Wild magazine. For many parents, it will be a choice between that or her mug shot for the family Christmas card.
Playboy Enterprises, Inc. (NYSE: PLA) may not be doing so well, but it's still one of my favorite companies -- I'm a guy, so this makes sense. The company reported Q4 and full-year earnings today -- losses have widened, and I'm sure not a few investors out there are questioning the value of the brand.
Total net revenues saw a slight decline for the quarter, coming in at roughly $86 million. The company lost 3 cents per share on these revenues; in the previous year's quarter, Playboy actually booked a much more pulchritudinous 11 cents per share of positive net income. For the year, total net revenues didn't jump like a bunny -- $340 million versus $331 million. Net income, however, was much better, doubling to 15 cents per share. The company's year-end results benefited from a decline in interest expense, income tax obligations, and other costs. Sales of artwork were also cited by CEO Christie Hefner in the release.
The licensing operations are performing, but domestic TV and publishing are very weak. In fact, it is the publishing segment that really needs attention. It's been needing attention for a long time now -- for the year, subscription sales were down, newsstand sales were down, and advertising revenues rose by the smallest bit.
Long-term, I still have hope for Hugh Hefner's Playboy. It is an American icon, and its logo continues to propel licensing; plus, the company does have a nice presence in Vegas at the Palms Casino Resort. As Jonathan Berr reported back in November, you may want to remember that sex does indeed sell, and one has to assume that Playboy will be supplying that demand for years to come.
Penthouse Media Group has agreed to acquire the parent company of AdultFriendFinder, a website devoted helping adults find love -- or at least sex. The site is different from more mainstream (although AdultFriendFinder's traffic would seem to indicate its more mainstream that we care to think) sites like eHarmony in that the emphasis is on "hooking up" and there is little in the way of bragging about couples who met on the site.
According to the USA Today, Penthouse, which was acquired by Marc Bell and Daniel Stanton out of bankruptcy in 2004, plans to aggressively pursue acquisitions and possibly take itself public in the next few years.
Here's what's interesting: this is a company that owns social networking websites and was founded in 1996. It just sold for $500 million.
If you're a woman of a certain age (that age at which you decide you never wish to pose for Playboy), you may be at the altar of All That Is Good and True praying that Kyla Ebbert's 15 minutes of fame would be up already!
If you're anyone else, you're probably clicking over to Playboy.com right now to see her sexy lingerie-clad shots (there's also a video of Kyla wearing nothing but a barely-long-enough cowl-neck shirt walking down a hotel hallway). You are probably thinking one of two things: (1) this is the first time that terrible fashion sense actually paid; or (2) Southwest Airlines (NYSE: LUV) is very, very smart.
This is the first time I can remember that some awful PR for an airline ended up paying off for both the airline and the wronged passenger, prolonging not only Kyla Ebbert's 15 minutes but also Southwest's own.
When Ebbert first was escorted off a Southwest plane for her skimpy attire (and, after begging and adjusting her tank top and skirt, allowed back on), she said she was humiliated. It was a few months later before she decided to tell someone about it; probably urged by her boyfriend, hoping to go from ordinary schlep to Boyfriend of Playboy Model. Suddenly: everyone was buzzing. It looked bad for Southwest -- very bad.
But like the Teflon Don of airlines, Southwest bounced back, apologizing to Kyla and offering a skimpy fare sale in her honor. Southwest did not get her permission to use her name in its advertising. It did not affect Southwest's prospects in the slightest.
Now Southwest is memorialized as the launchpad for the fake-blonde-who-could turn 15 minutes into too long; and it's not lost a bit of its edgy, sexy cache. Bravo, Southwest, for turning mud into smutty gold.
The holiday season may have just begun, but the earnings season continues. Here are some highlights of this past week's earnings coverage from BloggingStocks:
Shares of the Chicago-based company are up about 10% over the past six months. Playboy is gaining new pop culture relevance thanks to "The Girls Next Door" and that will be further helped whenever the big budget movie about Hefner gets made.
Playboy, though, is a small fish in a very big media pond. Net income for the quarter was $2.6 billion, or 8 cents per share, compared with $1.1 million, or 3 cents, a year earlier, beating Wall Street consensus forecasts of 6 cents. The revenue figure of $82.8 million -- only a 1% gain from the year-earlier period -- missed analysts' estimates of $86 million.
Take it Private! is a new series looking at one company each week that, in my opinion, has no reason for being public. To find these companies, I screen for the following:
I have to admit, I completely missed this move. I usually keep tabs on 
The conventional wisdom is that purveyors of pornography do well in soft economies. When people are unemployed and high gas prices make travel and dinners out expensive, many men choose to stay home with a good book and a pretty girl.
The dysfunctional state of the mainstream magazine industry is apparently not enough to dissuade the purveyors of the Girls Gone Wild video franchise from flashing the newsstand. According to 
Penthouse Media Group has agreed to acquire the parent company of AdultFriendFinder, a website devoted helping adults find love -- or at least sex. The site is different from more mainstream (although AdultFriendFinder's traffic would seem to indicate its more mainstream that we care to think) sites like eHarmony in that the emphasis is on "hooking up" and there is little in the way of bragging about couples who met on the site.
If you're a woman of a certain age (that age at which you decide you never wish to pose for Playboy), you may be at the altar of All That Is Good and True praying that Kyla Ebbert's 15 minutes of fame would be up already!
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