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Focus Media Holding Ltd. Message Board

  • tkefinch tkefinch Apr 17, 2008 11:29 PM Flag

    Pulled the trigger at $32.25

    In less you guys are in for the long haul I suggest you buy it on the down days like today and take it off the table when it goes up 3-4%. Thats exactly what these hedge funds are doing. If you can't beat them join them...

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    • Doubled up on my investment.

      Here is S&P's analysis of FMCN as of 08/21/2008.

      We believe FMCN is poised to take advantage of what we see as significant revenue growth opportunities in China. We expect the company to continue expanding its geographic footprint by purchasing static outdoor displays and converting them to more profitable digital displays.
      We also see FMCN benefiting from greater pricing power in its in-store segment following the acquisition of CGEN. Although the company recently lowered its revenue outlook for the mobile segment, the unit represents only about
      6% of total revenues and we believe the growth
      story at FMCN is intact. We are also encouraged
      by the FMCN's recently announced plans
      to focus on generating free cash flow from existing
      businesses, given acquisition costs have
      exceeded free cash flow from operations in recent
      years despite strong earnings growth.

      Risks to our recommendation and target price
      include governance issues with a controlling
      shareholder, an economic slowdown in China,
      and political risks associated with that nation.

      Our discounted cash flow-based 12-month target
      price for these volatile shares is $60. Our
      assumptions include an 11.3% weighted average
      cost of capital and 4.0% terminal growth

    • Sold my shares at 33.44.. Waiting for it to drop a little to buy back more shares

    • Tkefinch - Thanks for your generous reply. I think that you made a great investment at your price entry point. In the big scheme of things, if the stock goes up to $ 60.00 per share (which I truly believe that it will by September, 2008), then there is relatively little difference in whether you got in at
      $ 32.25 or $ 30.95 per share. As to the drop in the recent price of the stock due to the cessation of some of the mobile phone advertisement, I also believe that the investing community overreacted negatively to the news and did not take into consideration the public relations history of the company. Two firms (Piper Jaffrey and Goldman Sachs) both "downgraded" the earnings estimates for all of 2008 for the company by $ 0.20 per share. Also, Piper lowered its estimated target price for the stock to $ 65.00 per share (down from $ 86.00 just two days earlier) and Goldman lowered its target price of the stock to $ 66.00 per share from $ 67.00 (a whooping $ 1.00).

      These downgrades in earnings estimates do not take into consideration the fact that Focus Media might be able to generate replacement revenues and earnings by reallocating the time that they had previously allocated to the mobile phone advertising business into expanding other business avenues (which just might prove to be even more profitable than the mobile phone advertising business.

      Also, as I said in a previous post, the management of this company has historically been extremely in their financial projections and for 6 out of the past 7 quarters has reported actual operating results that have beat, not only their own guidance, but the street's as well. I guess you might say that they believe in underpromising and overdelivering.

      With the next earnings release scheduled to occur in the early part of May (for the 1st quarter of 2008), I would recommend that you consider holding onto your shares as they historically have made a strong run upwards during the 2 to 3 day period preceding their actual release date.

      Good luck to you and all other traders and I hope to talk to you again soon.

    • Hey Tkefinch - I want to be the first to congratulate you on your close of $ 32.66 which is above your $ 32.25 entry point. Wow, talk about some wild swings. I was looking awful foolish early this morning and then when the stock dipped way down, I started to look like a stock market guru (ha). Glad that it closed well for you. I certainly wish that it would have held onto some of the larger gains that it had during the mid part of the day, but I guess any gain is better that any loss. After hours, someone sold some shares for
      $ 32.01, but I would not put too much credence in the price or direction of the stock based on extremely limited after market trades. You saw just yesterday that the stock went up about $ 0.50 cents in after hours trading only to give all of it back plus about
      $ 1.50 more at one point during the day.

      Again, good luck to you and all traders.

      • 1 Reply to mardob55
      • Thanks it nice to know there are some mature people on these boards. In an case, I wish I would have waited a little to buy and I could have bought much lower. I guess I should listen to my own advice next time and wait for the price swing. I may end up holding on to this stock for some time since I think this is an overall good company with good earnings. Then again I guess it only matters what the investment firms believe since they're the ones swinging the price.

    • I wish you the best of luck in your investment, but I truly believe that you "pulled the trigger" too early on this one. While I definitely am a "bull" on this stock in the next 4 to 6 months, I think that it will be negatively affected by the general market conditions (especially the troubled companies in the financial and brokerage sectors) in the next few weeks as earnings are announced. For example, tomorrow (Friday), Citibank releases its earnings and they are expected to be extremely negative with hugh losses reported for the first quarter and negative forward looking statements being issued by management. Also, there is speculation that they will have to raise additional capital which will obviously be dilutive to the existing shareholders. Several other financial firms (i.e. Wells Fargo, Goldman Sachs, etc.) are also scheduled to announce their first quarter results shortly and they are all expected to be extremely negative. In particular however, I think that you would have had an opportunity to purchase your shares tomorrow at a price around $ 30.75 to $ 31.00 per share as I predict the entire market will sell off substantially as a result of the Citibank release, the fact that it is a Friday, it is options expiration day and the market makers will not allow the "bid" prices on the call options to get too high, people generally like to "square" their positions going into the weekend, the continued price of oil, etc.

      I hope that I am wrong on ALL of this as I too
      am long the stock. It's just that my 30 years of investment experience has taught me quite a few lessons (most of them the hard way - ha).
      If you are an investor and not a day trader, then I believe that you have a great entry point on the stock and will see it rise to the $ 55 to $ 60 range by August due to the increased revenue stream from the Olympics. Do not worry about the loss of the mobile phone advertising revenue (projected to be only 6% of total revenues for the year). This company has a history of "sandbagging" their earnings forcasts (just go back for the last 3 quarters to verify this), so they will "surprise" the street by report revenues and profits that exceed their original guidance. The street will react favorably and the stock will skyrocket.

      I wish you and all other investors the best of luck.