June gloomy for new media firms
Netflix, Napster, TiVo, video gamers dip; sat radio, Google upThe Nasdaq didn't budge last month, but it still outperformed many new-media stocks.
Netflix Inc. dropped 11.5% in June, Napster Inc. was off 9.3% and TiVo Inc. fell 7.4%. NDS Corp., a TiVo competitor controlled by News Corp., dropped 6.5%.
Even Apple Inc. didn't benefit much from the massive publicity surrounding Friday's iPhone launch. The stock ended the month at $122.04, just 0.7% higher than where it began.
Of the roughly two dozen analysts covering Apple, according to Yahoo Finance, the mean target price for shares is $135.
Rare winners in June included stocks that have been mostly losers all year, such as Sirius Satellite Radio, up 3.1%, and XM Satellite Radio, up 1.6%. The companies agreed to merge — in theory a positive development — though their shares are down since the agreement because of Wall Street fears the merger will be prevented by federal regulators.
Late in the month, however, Wall Street firm Morgan Joseph upgraded Sirius to a "buy" and $4 price target, expressing confidence in the company whether or not it merges with XM. Sirius ended the month at $3.02.
Sirius is like EchoStar Communications Corp. in late 1997, according to analysts at Morgan Joseph, when a promising start turned into negative sentiment. Picking up shares of EchoStar at the time, one could have made 15 times one's investment. Morgan Joseph isn't as bullish on XM, rating it a "hold."
Meanwhile, Bear Stearns rates Sirius and XM "outperform" even though the firm acknowledges "increased competition on multiple fronts."
Bear Stearns analyst Robert Peck said that Sirius and XM need to prepare for competition from HD radio, which he calls "transformational for terrestrial radio."
Shares of Internet giant Google Inc. also gained ground in June, rising 5% as its top competitor, Yahoo, dropped 5.5%. Wall Street appears still to be digesting the news that Terry Semel has left the CEO spot at Yahoo, replaced by co-founder Jerry Yang, even as analysts have mostly praised the change.
"Naming Mr. Yang CEO should increase employee morale and help to attract technical talent to the company," JMP Securities analyst William Morrison said.
Jefferies & Co. analyst Youssef Squali called Yahoo a "value" pick and said he views the company as an acquisition target. Google, however, is the analyst's top pick among large-cap Internet stocks.
Squali has a $610 price target on Google shares and $36 target on Yahoo. Google closed the month at $522.70 and Yahoo at $27.13.
That Squali said Yahoo is takeover bait isn't unusual. "We view literally every one of the companies under our coverage (except for Google and eBay because of their size) as acquisition targets," he wrote.
Squali said Internet companies will be taken over in part because of "the need of traditional media companies to play catch-up online."
Elsewhere, Avid Technology Inc. rose 3.7% to $35.35 for the month. Canaccord Adams analyst Steven Frankel reiterated his $40 target and "buy" recommendation, predicting shares "have more potential upside than downside at current levels."
Avid, a dominant force in digital editing and 3-D animation, last month appointed John Park of Blum Capital to its board of directors, "putting increased heat on management to perform," Frankel said. Blum Capital is Avid's largest shareholder, with 17.5% of the company.
"We would not be surprised to see headcount reductions and perhaps a rethinking of the commitment to the consumer business," Frankel said.
Meanwhile, June's losers included many video game stocks, led by a 10.5% decline for THQ Inc. Late in the month, First Albany initiated coverage of the stock with a "neutral" rating, while MDB Capital Group started it with a "buy."
Activision Inc. shares lost 5.7% last month, Electronic Arts declined 3.2% and Take-Two Interactive Software fell 3%, while Midway Games Inc. rose fractionally.