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Dex Media, Inc. Message Board

  • SceneTurn SceneTurn May 18, 2011 2:55 PM Flag

    I love it when the shorts start buzzing hysterically

    It is always been a precursor to good things. You can smell the fear.

    I just have to repost my previous comments in the face of such "confidence" among those praying for the demise of Dex One...................

    You assume that because printed yellow page ad sales are in an obvious secular decline that DEXO must fail, regardless of how much cash the business throws off in the interim. Not necessarily. When was the last time anyone you know used a pager? Clearly, two-way paging has been in decline since the advent of text messaging on cell phones. Even so, a paging company called USA Mobility (USMO $15.40) has seen its stock price rise from $5.85 in June 2003 to $15.69 today, despite a sales decline from $597 mil. in 2003 to $233 mil. in 2010 (a -12.6% annual rate of decline on average over 7 years). How is that possible? Because at $5.85 in 2003 the market cap. of USMO was only $112 mil. -- far too pessimistic discount to the roughly $100 mil. per year in annual free cash flow that the business actually produced over each of the past seven years on average, despite the massive decline in sales.

    Investing in a depleting asset can be very lucrative if you pay a low enough price. An oil well will eventually run out of oil, but it will produce a certain amount of cash before it does so.

    If DEXO's rate of sales decline is reduced from about 15% recently to around 7% soon enough, the stock should rebound in a big way, given that the small market cap at this price has been so sharply reduced, compared to the $350 mil. in free cash flow they should produce in 2011. The small and medium-sized businesses to which Dex One sells local advertising are only just now barely joining in the economic recovery that has been underway for the larger economy for 20+ months already.

    Dex One is also implementing a plan to accelerate their online offerings. European yellow page companies already get about 50% of their yellow page ad sales from online ads. Great potential for Dex One to follow suit (only about 10% of its sales were from online ads in 2010).

    By the way, check out the "Internet & Online Services" section of the yellow pages and you'll find a paid listing for "Google." Why would Google pay to be listed in the yellow pages? Could it possibly be because it brings them customers? (Yahoo, OpenTable.com, and Salesforce.com also pay for listings in the yellow pages...)

    But you seem to know what you're doing because you are very emphatic. You had better just go ahead and follow your gut. This looks way too risky. After all, when is the last time anybody made money off of a stock that looked terrible to the average investor?

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    • LOL ok shorty make sure your boss is paying you overtime tonight. I've watched yo guys beat this down from 28.00 and now its payback time.

    • The value of a stock of a company is no longer about earnings, cash flow, investment, free cash, ebita, debita or do.....its solely about hedge fund activity and what they want to do or where they want a company to go. The management of this company either realized this or they are a part of the shorting frenzy that is occuring here. I don't know which, but it was good reading though and well thought out. Just not applicable anymore in the days of naked short selling! I think the poster earlier this week was right when he said option Friday is this Friday and the closest price point is $2.50. They hedge funds will keep it close to that until Friday. Now is management behind manipulation of the stock to reach that price point. That is what the SEC and FBI will have to tell us!

      • 1 Reply to wrenmom325
      • Actually, a stock does not end up at the nearest strike price when options expire, but much closer to where the maximum pain is felt between all of the existing puts and call options out there. It is highly unlikely that the 2.50 PPS is the max pain for DEXO as this is a new 52 week low. Considering that put activity is likely very high compared to call options, then the max pain could be back at $4.00 or even higher.

        It would be my expectation that PPS would rise considerably from here if you use max pain theory.

        I have not looked into outstanding contracts expiring this month as well as the max pain PPS for these contracts. Someone may be able to look this up and see if it is closer to $4.00 as I suspect.

    • thank you for the info. it is rebuilding my faith. I bought this at 4 dollars. I am going to hang on.

    • thank you for the info. it is rebuilding my faith. I bought this at 4 dollars. I am going to hang on.

    • Short-term there is some potential here. Very possible to retest the $5 area.

      Key to longer-term success is stabilizing revenues and lower expenses at a greater rate than the additional loss of revenues if the trend continues as we all expect for a while.

      A big key is to continue to pay down principal on debt as this adds to cash flow due to lower overall interest. As long as debt is not due for a few years and DEXO maintains ability to refinance, there is a possibility that we could rise back to double-digits if their revenues stabilize.

    • Great write up! I couldn't agree more. Hope it reverses tomorrow because started loading up the truck the last few days. The valuation is too low to pass up. At $350MM cash flow, I'm getting less than one times cash flow or EBITDA... just a fraction.

 
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