LodgeNet Interactive Corporation (LNET) just issued the following comment regarding a research report dated January 19, 2011 by Craig-Hallum Capital Group who said that one of LodgeNet’s largest hotel customers has implemented a policy regarding adult content. The report also raised concerns regarding the impact of such a decision on LodgeNet’s Guest Entertainment revenues.
LodgeNet says it was not aware of Craig-Hallum’s report in advance, but believes that that the following information should be considered in connection with his comments in order to clarify the contents of the report and assure that the information contained therein is not inaccurate or misleading.
– LodgeNet has always offered hotels options to restrict mature content. The customer in question has an option to restrict adult content, but only beginning in 2013. The customer and LodgeNet have adjusted the economic model in such a way as to assure that the Company is economically indifferent to decisions made by the brand to offer mature content.
– No existing agreements are affected, and future agreements with this customer are expected to be structured in a manner that also do not have a material adverse impact on the Company’s return on invested capital. Similarly, there is no expected economic impact as a result of this agreement in either 2011 or 2012. There is no change in programming expected at currently installed properties in 2011 or 2012.
– The Company’s ongoing relationship with the customer in question is good, and LodgeNet is actively engaged with the customer in discussions regarding the upgrade of their existing systems to high-definition and providing new services that would generate incremental revenues.
LodgeNet also said that it stands behind its guidance, and has not adjusted its projections or outlook as a result of the agreement referenced in the report.
Technically speaking, shares of LNET have staged [at least for the moment] a fairly substantial reversal during mid-day trading on Tuesday. After opening weaker, the stock has been gaining in the last hour and is currently 9% higher from its lows, a turnaround of more than 14%.
Today’s trading range for shares of LodgeNet Interactive Corp has been between $2.88 and $3.33 per share. Volume has exploded with more than 4.3 million shares already trading hands compared to a daily average volume of just 354,000.
The median Wall Street price target on the stock is $3.50 with a high target of $6.00.
At last check, LNET was down 66 cents, or 16.02%, to $3.46.
LodgeNet Interactive Corporation provides interactive media and connectivity solutions for the hospitality industry in the United States, Canada, and Mexico. The co. was founded in 1980 and is headquartered in Sioux Falls, South Dakota.
Disclosure: No Position