Can WebMD blame the business climate?
Posted
Apr 23 2008, 03:06 PM
by
Kim Peterson
Rating:
WebMD shares got hammered today after the company said it wasn't going to make as much this year as it thought. The reason? Advertisers aren't spending as much, falling back on shorter-term ad buys instead of long-term commitments. WebMD diagnosed "increased caution in the current business climate."
WebMD makes itself out to be the victim of spiraling trends in the advertising industry, but analysts aren't so sure. WebMD's advertisers are drugmakers and other healthcare companies generally thought to be safe plays even in this economy. Yes, we've seen some disappointing earnings news recently from Eli Lilly and Pfizer, but other companies like Novartis are doing well.
I think Goldman Sachs analyst Jennifer Watson is on to something when she said that advertisers might be testing cheaper alternatives, such as new ad networks that target smaller health sites. If that's the case, then WebMD's problems are more serious than the company is projecting. It's losing customers to the competition, not to the slowing economy.
At any rate, WebMD lowered its 2008 net profit forecast to between $29.5 million and $37.5 million, down from $36.5 million to $46 million. Its revenue estimate took a hit as well, dropping to under $400 million from the old forecast of $395 million to $415 million.
Analysts had been expecting $42 million in profit and $403 million in sales. WebMD shares plummeted 13% today to close at $25.27.
