For Martha Stewart, a very good thing appears about to happen — and her stock price is soaring to its highest price since mid-May 2010. It closed at $6.36 on Monday, up 14 percent on the day.
Wall Street analysts who follow Martha Stewart Living Omnimedia attribute the rise to a belief that a deal is imminent to begin selling Martha merchandise through retailers in Latin America, Asia and Australia.
CEO Daniel Dienst had given guidance to that effect on March 6 when he released surprisingly strong fourth-quarter results, which showed the company had swung to a $3.2 million operating profit for the period ending Dec. 31, compared with a loss of $1.8 million in the same quarter a year earlier.
Now Wall Street seems to think that a deal with a retailer — or several retailers — is about to happen.
“We think the company is very close to announcing this, based on guidance they gave on the fourth-quarter earnings call,” said Michael Kupinski, an analyst at Noble Financial Capital Markets who follows the MSO stock.
“There could be a potential equity component to it,” added Kupinski. “Raising cash would enable them to do some sort of stock buyback.”
“People realize they are going to do a deal,” said Robert Routh, an analyst at FBN who upgraded his rating to “outperform” following a fourth quarter that “blew away my estimates.”
Part of the improvement came because, as of Nov. 1, Martha Stewart Living turned over all production and advertising for Martha Stewart Living and Martha Stewart Weddings to Meredith Corp., under a 10-year licensing pact. MSLO would continue producing the editorial for the magazines and digital properties.
Routh also noted that CEO Dienst and CFO Ken West, have stock options that kick in if the stock spends 30 consecutive days trading above certain benchmarks ranging from $6 a share and stepping up in three additional stages to reach $12 a share.
He said more than half the stock option compensation for the top two executives is tied to sustaining the stock highs for 30 consecutive days.
Routh also said that, after cutting losses in publishing, the cash on hand increased from $49 million at the end of the year to $55 million by the time of the earnings call on March 6.
Neither analyst offered an idea on which partner Martha Stewart would select to bring the domestic diva’s goods to overseas consumers.
Even while the stock was soaring, there was one minor flap Monday among some Martha followers.
Subscribers to the digital editions of Martha Stewart Living were no longer getting any extra features.
They were simply being offered a replica edition of what was included in the printed magazine. At presstime, neither Meredith nor Martha Stewart could explain who was responsible for the change.
The company declined to comment on the stock price.
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