The Motley Fool

Why Yellow Media Shares Went Red

10% Promise Series

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of digital and print media company Yellow Media (TSX:Y) plunged about 10% on Thursday after its quarterly results disappointed Bay Street.

So what: The stock has soared over the past six months on optimism over the company’s digital transformation, but today’s Q4 results — EBITDA plunged 36% to $91.3 million as revenue sank 10% to $238 million — are forcing Mr. Market to sober up a bit. In fact, operating margins narrowed to 38.3% versus 53.6% in the year-ago period, suggesting that the transition is becoming more expensive than analysts had expected.

Now what: Management remains bullish about its longer-term digital growth prospects. “Yellow Media is strongly positioned to proceed with the second phase of its digital transformation,” said President and CEO Julien Billot. “Our end goal is to grow Yellow Media into a sustainable local digital media company by extending the reach of our brand, attracting new digital audiences, better addressing our advertisers’ needs and investing in our employees.”

Of course, when you couple the uncertainty surrounding Yellow Media’s restructuring with its still-red hot stock price — up more than 100% since October — the risk/reward tradeoff remains rather unappealing.


Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.