UBS Securities analyst Lucas Binder maintained his “neutral” rating and $12.50 per share price target on Playboy Enterprises, adding in a research note that domestic television revenues for the company appear to be stabilizing.
In the second quarter, domestic TV revenue at Playboy was $21.6 million, a 4% increase over the same period last year and reversing a downward trend over the past few quarters. Overall, the entertainment division reported income of $7.3 million, a 50% increase over 2006, and revenue rose 9% to $51.8 million. That prompted Binder to estimate that the second half of the year will show similar growth.
“Additionally, we believe international TV and online will continue to grow, leading to overall growth and entertainment revenue and segment income,” Binder wrote in a research report.
For the third quarter the analyst estimated that, while he does not expect the unit’s profitability to grow as much as it did in the first quarter, “we are expecting the first back-to-back quarterly segment income growth in entertainment since [the second quarter of] 2005.”
Binder also expects Playboy’s licensing business to continue to benefit from the Playboy Club in the third quarter — he expects income to reach $5 million in the period, representing 32% growth year-over-year.
Those gains are expected to offset continued declines at the magazine segment, which reported increased segment losses in the period and a 5% drop in revenue.
Playboy is expected to report third quarter results during the first week of November.
