Opinions
Michael Decter
Indigo Books & Music Inc.
IDG-T
BUY ON WEAKNESS
May 25, 2016
$18.250
Stock price when the opinion was issued
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COMMENT
Advent of digital books and e-readers is an opportunity for them. Near-term earnings are going down a bit as they put money towards the electronic initiative. Earnings were down 21% year-over-year and coming quarter expected to be up 6%. Earnings expected to slip from $1.22 in 09 to $1.17 in 10 and forecasting 15% growth in 2011. 11X PE.
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COMMENT
Stuck in a very tough business environment. Being affected by online businesses or you can now get books. Also a lot of tablets, where you can get online books, will make it tough for them. They were a large owner of Kobo, which was just sold so they should net $70 million-$80 million free cash which should help them sustain the dividend.
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Has had a huge run and is not sure he would be courageous enough to get onboard at this point. Management has done a remarkable job of building this. He would look for a little lower entry point.