I’m Going To Call A Market Bottom (at least for now) On Demand Media

There is a lot of talk about Demand Media, Inc, and there consistently diminishing share price over the last two weeks of trading (you can click here too)

Today shares of Demand Media hit an all time low at $13.99 before closing at $14.67.

At $13.99 shares are trading at almost 50% of its high and almost 30% off its IPO price of $17.

So I’m going to go against the grain and call a market bottom, at least for the near term of the shares at $14.

Demand still owns Enom.com which is the world’s second largest domain name registrar with over 10,000,000 domains under management.

eHow. while knocked around by Google’s knockdown is still around and ranking and the company issued a statement saying they were still doing fine.

The market reacted to the news about eHow and now I think the reaction borders on over-reaction.

The lock up period for insiders expires 6 months from the IPO (late January)  or sometime in late June then all bets are off.

For the disclaimers:

As of time of publication, I do not own shares or have a short position or any position in Demand stock or options.

 

 

Comments

  1. says

    True that they do have a decent set of assets to support a floor on their shareprice. They also have an owenership stake in NameJet and a nice list of premium domains as well. We also must remember that they also carry (like many companies) a big potential liability in terms of lawsuits for things such as copyright infreingement with all that “content” they sell, that could easily wipe out any tangeble asset valuation. Am not convincedthat the lawsuits are a genuine threat now…but something to think about. Playing in the media sandbox can be a bitch.

  2. says

    Mike – look at the financials. This company lost money in 2010 and 2009 (now with eHow getting knocked in the SERPs that is only less revenue in 2011). Their balance sheet is horrible. 60% of their balance sheet assets is Goodwill & Intangible Assets (the weakest two assets anyone can have). And their current assets are $5MM short of their current liabilities. And in each of the past two years they have had negative cash flow.

    With a market cap of $1.2 Billion this thing still has a long way to drop. By end of year I wouldn’t be surprised to see this with a market cap of $500 Million or even significantly less.

  3. MHB says

    TLD

    Demand lost money in 2010 and 2009 before they went public and sold out at $17 and went as high as $27.

    Nothing new here except for Google’s Panda.

    Again I have no stake in the race but it looks oversold to me.

    At least for the moment

  4. says

    I’ve been in the stock market for a long time now…and one thing i learned is that you do NOT try to catch a falling knife!

    It’s very hard to stop a sell-off…especially when there is a domino effect in place…more and more people keep selling as this thing keeps getting lower and lower…very scary to pick a bottom!

    From the charts, it looks like it was trying to make a come back today…and one can only assume that it hit the bottom today…but i really doubt it.

    I think its headed lower.

    It will start heading higher after all the sellers are done selling…so it has to fall one hard time…probably $2 to $3 a share, then you will see a “V” shaped recovery.

    From this little turn around action that you witnessed today, you can not assume a bottom.

    More selling coming!

    Good Luck!

  5. Em says

    Hi Mike,

    I think it will take a few days to be able to call a bottom. There really has been nothing indicating it as of yet other than it hitting it’s low. I think we’ll have to wait a few days to see if it has hit it’s bottom. To me, it still looks freefall. If it retraces somewhat, I would then consider it a bottom.

    I have no stake in Demand Media either.

  6. cool says

    What will happen when insiders start selling like mad and lock up period? Going put pressure on stock imo.

    I think a good entry price could be 9 for a long term ownership.

    Time will tell. But the poster child I’m waiting on is godadddy. Cash cow and auction house imo.

  7. says

    I think the stock will continue to fall. The news has only been bad for Demand Media recently.

    They failed to turn a profit in 2009 or 2010 and just took a huge blow from Google indexing.

    I am sure the insiders are counting the days until they can dump their shares and cash in.

    Brad

  8. says

    Shorted the stock at $23 covered at $15.99 did not think it going to $13.99. Might be a trade for those that bought at $14 back to $15 and change. Earnings come out next week, should be an interesting conference call.

  9. says

    Their financials are a dick train to begin with, not to mention possible accounting shenanigans. IMO, the IPO was just groundwork for a classic ‘glorious exit’ reminiscent of the worthless tech pump and dumps circa 1998. Watch the scaling out once the lockup period expires. Think any institutions want to soak up big blocks of THAT common? Lulz.

    Why ever people invest their money in companies like this, I’ll never, ever understand. Short this fucker on to the pinks.

  10. says

    Just noticed this casting call – Demand Media is casting for a webisode for their TypeF.com site.

    “”DEMAND MEDIA BEAUTY-FOCUSED WEB SERIES (Female Hand Model) for a Webisode for typeF.com, a fashion & beauty-focused website within Demand Media network. “”

    (With their stock dropping like a bad habit, no wonder they’re only offering a $100 for this job. )

  11. NedRyerson says

    Well – where are all the “bottom callers” now?

    One item for consideration: Maybe setting up an entire business model built around content people want to see (eHow and ContentLive), a platform for others to use (Pluck) and a cash-rich/steady income domain name business (eNom) is more valuable the a newspaper company? That just maybe the slew of investors that put something like $200M into this business could actually be on to something?

    Or – should we listen to DMD-haters that seem to be composed of bloggers, “journalists” and former employees pointing out some crap content?

    How much did that “crap content” cost DMD to produce? All in maybe $200? Depending on how you value your time – It’s a good bet that DMD-haters spend more of their “valuable” time writing about DMD’s crappy content than DMD spent having it created.

    Now, thanks to Google – DMD can prune poor performing articles (which probably did not generate much revenue anyway) and tweak their model (again).

    Ned

  12. huh says

    sure ned, it works so long as another company (google) tells dmd what people are searching for. they’re not obligated to do that. nor are they obligated to list dmd seo-styled sites in search results. dmd lives or dies based on what google decides to do.

  13. MHB says

    Jones

    Don;t think so.

    I did at the time say it was a bottom “at least for now”

    Since then the stock went up over 30% to $19.10 so there was plenty of time to get out with a nice profit

  14. says

    Demand Media went below $12 today, and closed @ $12.20.

    The IPO launched on 1/26. I assume the (6) months starts counting from that date. That means under two weeks from now.

    Look out below….

    Brad

  15. Snoopy says

    Personally think this will be a $5-$10 stock in the future. Much lower in a few years time. It isn’t really a growth stock in my view, not with their reliance on Google and perceptions of low quality offerings.

    I’d ask this question: If the company has minimal growth over the next few years what it it really worth? What would a company be worth normally with $300million in annual sales and very patchy profitability? It certainly wouldn’t be $1billion.

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