Why Central European Media Shares Tumbled

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Central European Media Enterprises were falling hard today, down as much as 57%, after the company turned in a poor earnings report, and said it needed additional financing to stay afloat.

So what: The diversified media operator said revenue slipped 3% to $135.8 million, while operating income fell to negative $45 million, from -$18.4 million the year before. On a per-share basis, the company lost $0.16. Recently appointed co-CEO Michael Del Nin said, "[co-CEO] Christoph [Mainusch] and I find this level of performance unacceptable," and said that they plan to make quick improvements. The two CEOs also lowered the full-year forecast to revenue of $640 million to $650 million, and OIBDA of negative $40 million to negative $30 million.

Now what: Most troubling to the market seemed to be the company's announcement that it would need new financing or other sources of cash to stem the effects of the negative free cash flow it's seen this year. At the end of the third quarter, the company had just $122.9 million in cash, with $946 million in debt, and free cash flow for the first nine months of the year was negative $77 million, in line with a year ago. The new CEOs were not specific, but this could be an appealing, though risky, contrarian play at this point. With a combined reach of 50 million people, and as the market leader in every country it serves, CME is not without its advantages. It's certainly worth keeping your eye on. You can add the company to your Watchlist by clicking right here.

A better way to invest in media?
Here in the U.S., we reportedly spend nearly 34 hours a week watching television! With television viewing taking up almost as much time as the average work week, the potential for profits in the space is enormous. The Motley Fool's top experts have created a new free report titled "Will Netflix Own the Future of Television?" The report not only outlines where the future of television is heading, but offers top ideas for how to profit. To get your free report, just click here!

The article Why Central European Media Shares Tumbled originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story