Rising tide in Showbiz 50 didn't lift all new-media boats

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The Nasdaq climbed 4.6% in May and The Hollywood Reporter Showbiz 50 index was up 5.5%. The rising tide didn't raise all the new-media boats, though.

Reluctant to participate in the month's rally, for example, were satellite radio firms Sirius and XM, down 4.7% and 1.9%, respectively, despite their bullish intentions to merge. And Yahoo was off 2.4% to $26.76 even though financier Carl Icahn is hoping to force a sale of the company for at least $33 a share.

And video game sales presumably are going gangbusters with Nintendo's "Wii Fit" and Take-Two Interactive Software's "Grand Theft Auto IV" flying off of store shelves, but investors might not know it by skittish video game stocks.

Electronic Arts fell 2.5% in May and Midway Games was off 15%, while THQ was up fractionally and Activision was up a hefty 24.8%.

THQ's gain came despite the bad news that its "Saints Row 2" game was being delayed from an August release to October. And Activision, according to Seeking Alpha, is one of the most respected stocks among Wall Street analysts, with 92% of the 25 who cover the stock calling it a "buy."

Take-Two, propped up by an unsolicited offer from EA, rose 3.2% to $27.07, higher than EA's bid of $25.74 per share.

The grandest of all new-media companies, Google and Apple, also saw their shares lift in May to the tune of 2% and 9.1%, respectively.

Goldman Sachs late in the month added Apple to its America's conviction buy list with analyst David Bailey upping his target to $220 from $185 previously. Shares closed the month at $188.75.

Imax in May posted mixed quarterly results that didn't move investors one way or the other, but the giant-screen company is landing some impressive deals with exhibitors and has some soon-to-be hit movies on its agenda.

Next week's "Kung Fu Panda" from DreamWorks Animation and after that "Batman Begins" from Warner Bros. are both getting the Imax treatment, just in time to take investors' minds off of "Speed Racer," "Shine a Light" and "The Spiderwick Chronicles."

Imax shares rose 9.2% in May to $7.23, and Merriman Curhan Ford analyst Eric Wold reiterated his "buy" recommendation and said he sees shares appreciating to $9.50-$10.50 next year.

Another new-media stock on the rise was RealNetworks, which was boosted early in the month on news it would spin off one of its businesses.

RealNetworks plans on making its casual gaming unit a separate company then distributing shares of it to RealNetworks stockholders. It might also raise money for the unit via an initial public offering.

Kaufman Bros. analyst Barbara Coffey raised her price target for the stock to $9 from $8, enthusiastic about the spinoff as well as the company's "very strong" first-quarter results, reported the same day as the spinoff news.

Shares of RealNetworks advanced 18.5% in May to $7.30.

Meanwhile, Napster, which competes with the Rhapsody subscription music service from RealNetworks, reported a quarterly loss that was less than Wall Street expected and announced it would launch an online store that will sell 6 million songs in an MP3 format without digital rights management. The news modestly impressed investors and shares closed the month up 3.3% to $1.55.

Canaccord Adams analyst Steven Frankel, though, reiterated his "sell" recommendation and $1.25 target price on Napster, writing: "The company continues to burn cash and the launch of DRM-free MP3 tracks is not enough to derail the iPod/iTunes juggernaut."

Even after its May gain, Napster has such little respect on Wall Street that its stock trades for little more than the $1.51 the company has per share in cash. With $69 million in the bank and zero debt, the company spent some the month in the unusual position of having a negative enterprise value.

That translates to a stock that's cheap enough for six of 13 analysts to recommend it as a "buy" or "strong buy," but another six call it a mere "hold." Frankel is the most bearish, arguing that the company's true cash balance is about $1.35 a share given that it owes roughly $11 million in music publishing royalties.

"Without a clear path to sustainable growth and profitability, we continue with our 'sell' rating," he said.
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