What's Behind Mood Media's Massive Selloff?

3/29/2013 2:03:00 PM
By Chuck Ansbacher

 

Mood Media has been on our radar over the past year due to its string of exciting acquisitions. Most recently, Mood acquired Technomedia Solutions and GoConvergence back in January. This was on top of acquiring Muzak and DMX both within the past year.


These pickups in a variety of interrelated media seem to set Mood up to become a one stop shop for in-store AV.


So how have these moves played out for the Canadian firm? If the stock market is any judge, horribly. At market's close yesterday, Mood was trading at $1.03, down 25.9 percent for the day, and down 75 percent from its May 1st high of $4.30.

So what's behind yesterday's sharp downward move? In short, a huge earnings miss. While the company posted $444 million in 1012 earnings and $132 million in fourth quarter earnings, up 51 percent versus the prior year's quarter, this was mostly due to acquisitions.


So far, Mood hasn't been able to translate those acquisitions into earnings. Earnings per share (EPS) were down $.08 vs. analyst expectations of $.01—eight times lower. That's a big miss for a stock trading in the $1 range.


The company has blamed the miss on high content expenses and lower equipment margins, which offset equipment and subscription revenues.


Mood Media is one of the only public companies in this industry, so its hard to say whether this is a unique situation or happening across the board. Mood's business model and ambitions are quite different from many in the AV integration space. However, low margins is a refrain we have been hearing non-stop from integrators large and small. The hope has been that services, subscriptions, and other new forms of recurring revenue will make up for this trend.


With Mood's acquisition streak possibly coming to a close, maybe the company is still figuring out how to get all these new properties to work together. The one stop shop model that they're pursuing has many in the industry taking note. While only time will tell, the movement of their stock has been startling to say the least.

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