Wait & Watch Story for Primedia

Primedia, Inc.’s (PRM - Analyst Report) advertising revenue for its core Apartment Guide business appears to be stabilizing, as the softening housing market slows condo conversions, and shrinks the business customer base. Meanwhile, we expect cost cutting efforts, including the consolidation of six PRM offices in New York City into one, to bolster declining earnings before interest, taxes, depreciation and amortization (EBITDA).

The management is taking a number of steps to improve revenue growth and profitability of the company. It is upgrading editorial talent, reducing draw (number of copies printed for sale) and reinvesting the savings into higher quality copies. Early indications are mixed however, and it is a wait-and-watch story.

We expect the slowing economy and battered housing market to turn revenue growth negative in the company’s two other businesses (New Homes and DistribuTech), which together generate one-third of its revenue. And we don’t foresee a meaningful near-term recovery in weak industry wide ad trends or the company’s revenue. We rate the stock a Hold with a six- month target price of $5.75.

Read the full analyst report on PRM