J.P Morgan Lowers Its PT On AirMedia Group Following Weak Earnings

AirMedia AMCN reported record high 4Q10 revenues of US$70.8Mn slightly above J.P Morgan's forecast of US$69.3Mn and consensus of US$70.0Mn and vs. company guidance of US$69.0Mn to US$71.0Mn. Non-GAAP EPS of US$0.11 is better than J.P Morgan's estimate of US$0.09 but lower than consensus' US$0.12. Lower earnings are mainly due to additional media acquisitions.

1Q11 guidance below expectation. Company guides 1Q11 to be US$58-60Mn, lower than our expectation of US$70.4Mn. While the company sees a good ad spending trend for the rest of the year, management sees some advertisers being more cautious in Q1. In addition, the company sees slower ad spending from automobile advertisers, with slower auto sales in large cities.

J.P Morgan remains Neutral with Dec-11 PT of US$7.5, down from earlier Dec-11 PT of US$9. JPM revised down its 2011/12 earnings by 72% and 75%, respectively on the back on higher concession fee assumption. Its DCF valuation assumes longer-term EBIT margins of 15% with around 10% long-term revenue growth. PT of US$7.5 implies 80.3x and 50.7x 11/12 diluted adjusted PE.

AMCN closed Monday at $5.69