True, Martha Stewart’s selling ads like gangbusters and always knows the best way to peel a mango, but Wall Street doesn’t seem to care anymore.
Most analysts are panning her Martha Stewart Living Omnimedia a full year after her comeback from prison, and some investors are betting her shares will tumble deeper toward the dreaded curse of $5 a share.
Some say that Stewart is losing so much money, she’ll be forced to take her empire private next year with a rich private equity fund on the prowl for good brands with bad records.
“Basically, this is the slow evaporation of a company,” said analyst Ivan Feinseth of Martix USA, whose firm has issued a “strong sell” rating on the stock with an estimate that it’ll slide by more than half to between $5 and $7 a share.
Of the five analysts who cover the company, four have slapped sells on the shares, which have lost 47 percent of their value it the past year. MSO closed yesterday at $15.53, up 34 cents on light volume.
The New York Stock Exchange also has kept the stock on its “doghouse list” of shares for a record 383 consecutive days.
The list consists of stocks favored by short-sellers, who bet shares will drop on bad news or other problems.
About 20 percent of its outstanding shares involve short-seller positions.
The Russell 2000 Index also has ranked the shares with one of its lowest rankings among analysts – fourth from last place.
Although the Martha Stewart products are beloved among consumers – including its flagship monthly Martha Stewart Living and its TV show “Martha” – steady losses have dogged the company for the past three years.
Its free cash flow has nose-dived from a positive $24 million in 2003 to a negative $56 million last year, and faces as much as a negative $82 million for 2006, according to market data.
“If you keep losing money, you eventually run out of it,” said Feinseth.
“I expect her to go to the capital markets next year, but the markets could be closed to her. She’ll have to turn to private equity markets, and perhaps go private and restructure,” he said.
Stewart controls 92 percent of the voting power of the media company and is its biggest shareholder.
Stewart’s company reports second-quarter earnings next week.
DOG DAYS
These are hardly hot times for Martha Stewart Living, which is winning few supporters on Wall Street.
Russell 2000 Index
Lowest average rating
1. Superior Industries
2. Kellwood Co.
3. Kemet Corp.
4. First Financial Bancorp
5. Jo-Ann Stores
6. Martha Stewart Living
7. Frontier Airlines
Short sellers tip list
Underperforming stocks
Consecutive days on list
Martha Stewart 383*
MBNA Capital 135
La-Z-Boy 124
Lehman Bros. 10
Six Flags 9
Krispy Kreme 8
NYSE Group 8
Midway Games 4
*Most number of days
Martha Stewart Stock Chart
Close $15.53
up 34 cents