Univision Communications (NYSE:UVN). Spanish language channel selling to the rapidly growing US spanish-speaking population. Great business, love the story. But on Friday we were given yet another reminder why depending on anything which has to do with future growth can be much more risky than we may realize. From Barron's stock spotlight:
[Univision] Shares dropped 8% after the Spanish-language media company posted earnings of 24 cents a share, a penny below analysts' expectations, citing "an overall soft television advertising market." Legg Mason downgraded the stock to Hold, saying "the company is clearly struggling."
So at .25 cents per share this quarter, this company was a Buy, but at .24 cents they are "clearly stuggling"? Well it makes sense if your entire valuation depends on multiplying dubious growth rates off of next years estimated earnings.
Most investors in these stocks hoping for "growth" are also discounting the possibility of serious immigration reform. The liklihood of a totally open border continuing, which is what UVN needs to grow, given terrorism and other concerns in the current political climate (think "minutemen") seems questionable.
Posted by: Ed | August 07, 2005 at 02:37 PM
Thanks for your comment. Yes, and a tiny change in immigration trends could shave off another penny. Or heck add a penny. The valuation of your asset shouldn't be so dependent on such business static.
Posted by: The Author | August 07, 2005 at 08:04 PM