Tuesday, November 11, 2008

Citi Downgrades Focus Media (FMCN) to Hold, Slashes Price Target

So just a few months ago I noted how, unlike their American peers the publicly traded Chinese digital signage operators seemed to be doing pretty well.  Well, it looks like the economy is catching up with at least one of them -- the biggie, in fact -- Focus Media.  As a recent StreetInsider article noted, "Citi [is downgrading] Focus Media from Buy to Hold. Price target [is] slashed from $53 to $18." Apparently, Citi analysts are less than bullish on the availability of advertising dollars in China during this economic downturn:
"We remain convinced that the Digital OOH business, with over 175k LCD displays & digital frames, and Allyes, proven business model with dominant market share - are valuable franchises, but believe near-term visibility in the current environment has diminished, and that advertiser demand is uncertain. Accordingly, until we get greater comfort on how long the weakness is likely to persist, we cannot recommend buying the stock."
Global forecasts for both network growth and network advertising growth were relatively bullish in the last few reports I've read, so I have to wonder if this news will have any major impact.  Focus is one of the few firms that could pull the entire sector's numbers down since it's so big (relatively speaking).  The good news, at least, is that there's no domino effect to be had, here. In other words, Focus missing sales targets will hurt Focus, but probably have no effect on other networks, even in China.

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