After its shock earnings downgrade, Seven West Media's share price slid nearly 23% yesterday, in the biggest daily drop the company has ever seen.
Earlier in the week, Seven West Media revealed it was downgrading its forecast for earnings before interest and tax (EBIT) by around $50 million to between $460 million and $470 million, down from previous expectations of $515 million.
The market has since gone into a frenzy, with market analysts predicting doom and gloom for the media industry. Some have suggested other companies, such as Ten Network Holdings, will follow suit with downgrades of their own.
Analysts have suggested the downgrade is a particular blow for the industry because Seven is a market leader.
Yesterday's trading on the ASX saw the company's stocks drop 22.81% to 2.91 cents, from 3.77 cents the previous day, the single largest daily drop in the company's short history.
Seven West Media's share price was at its lowest point in September and October 2011, sitting at around 2.5 cents.
At the time of writing, the share price sat at 2.99 cents, up 2.75% on yesterday.
Industry analysts have warned the downgrade spells trouble for the media industry.
Hamish McCathie, managing director of Pulse Markets, told AdNews,“This is very concerning for the media industry, which is in a bit of trouble. Investors are looking to get into the financial sector more than the media sector at the moment.
“I don't expect the television or media markets to turnaround until mid 2013. It's pretty slow.”
Cox Media principal Peter Cox said the downgrade is “scary for the industry”.
Another media analyst, who preferred to remain unnamed, said other companies will most likely downgrade their forecasts. “Ten has already downgraded for the half year to 31 August. If Seven has downgraded with only two months left in its year, one would expect Ten to downgrade again, as it has four months left. Ten needs about 25% ratings share which is just isn't getting.
“With interest rate falls, which take time to filter through, there will be no relief in the six months to 31 December. The whole calendar year is gone. There probably won't be any relief until 2013.”
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