Wednesday, July 8, 2009

The (not so) Great Outdoors (CCO, CBS, LAMR)

AlphaNinja - A bit of negative chatter the last few days about the outdoor advertising space.

Yesterday, Clear Channel (CCO) was upgraded to "average" from "below average" by Caris & Co., who thinks the bad news is priced into the stock at these levels.

"our checks indicate that business has not necessarily improved" and the company has resorted to "deep-sixing" ad rates in its core business to grab a larger share of the market.
But Miller said that strategy is "essentially built in to the stock."

Today however, CCO is knocked down by Benchmark Capital, who initiated coverage with a SELL, and sees fair value at $3 per share, a full 66% below yesterday's close. In addition to weak domestic results, Benchmark sees trouble in Europe and currency problems.

Benchmark also initiated coverage of Lamar Advertising (LAMR) with a sell for many of the same reasons. They note that over half of LAMR's revenue comes from restaurant, retail, automotive, real estate, amusements and hotel/motel -->>all of which are in rough patches.

Barrington Research is significantly lowering earnings estimates for CBS due to weak outdoor expectations. Barrington also notes that the high fixed cost nature of the outdoor biz creates dangerous downside when cash flows come down.

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