The current environment is a very challenging one for all media companies because as major ad buyers cut back their expenses, advertising is one of the most important cuts. I thought it would be interesting to take a closer look at two media companies. They are both very different in the fact that one is a financial data company (Interactive Data Corp) while The Knot is very specialised, a website dedicated to weddings.
Interactive Corp is a financial network that provides financial data, pricing to both individuals and professionals in the financial field. They have some diversification in the field as they offer their services in various ways. They are currently expanding and given the current environment and the attention given to what is happening in the markets, I would expect this company to have solid results in the upcoming months.
On the other side is Knot, a website that has gotten hammered in recent months. It is down almost 50% from its 52 week high. And there are rumors.. When the new executive leaves after 6 months on the job, it is not a great sign. When owners are selling their stock, doesn’t look great either. And even their website is not generating as much traffic and their recent profits have been either flat or down in recent months. One of their most importants sponsors, Macy’s has said it would not renew in 2010 when their agreement comes to an end.
They are a leader in their field and could become an acquisition target, but I simply think that trading at a P/E of 39 is just way too high, especially when I see the possibility of purchasing IDC for a PE of 18. So I would be making this pick on a relative basis, going LONG IDC and SHORT KNOT.