The stock-picking practice is normally aimed at helping investors generate higher returns in comparison to the overall market. Unfortunately, sometimes investors have the bad luck of purchasing stocks that fall short of the average returns of the market.
This is what has happened to the lead generation companies with close links to the online casino and sports betting industry Catena Media and XLMedia. The trend has been continuous for several quarters, indicating some unsolved problems that the companies probably face.
Shareholders of Catena Media See Massive 43% Share Price Decline in Three Years
Unfortunately for Catena Media, its long-term shareholders had experienced a significant 43% share price decline in three years in comparison to a market return of approximately 24%. Over the last year, the company’s share price dropped by 41% in value, with a 32% decline registered in a quarter only.
The last three years have been a tough period for Catena Media, as its share price declined considerably. Despite it is unusual to take into consideration the interaction between a company’s stock price and the earnings-per-share (EPS) that are generated by the company, it is worth mentioning the fact that the EPS of Catena Media have actually risen by 22% over the past three years.
According to experts, one should not try to make correlations between the change in share price and the one in EPS. Still, the Catena Media shareholders have lost 17% per year over the last three years, which makes the drop significant. On the other hand, such a large decline usually comes to indicate that a company is facing some challenges that remain unsolved.
The last few quarters have seen the stock price of the company plunge following financial results that have been lower than expected in the second quarter and the first half of 2019. In the third quarter of 2019, the trend seemed to remain stable, despite the company posted an overall positive result, as its revenues surpassed the preliminary projections by 3.9% reaching €26 million. The company’s profit also rose above analysts’ expectations, but in the longer term, the decline in Catena’s share price remains.
XLMedia Experiences Significant Share Fall Following Google Ranking Downdgrade
A week ago, the affiliate marketing company XLMedia warned of revenue hit. The company’s shares fell by 29.4% at the time it revealed that recent changes to its websites’ rankings in Google. This, on the other hand, has led to a massive decline in traffic that has made the company announce expectations for lower company’s revenue.
On January 13th, 2020, Google implemented a new update for its search algorithm, and several days later, on January 16th, added that the update was “mostly done”. Following the announcement of XLMedia, the company’s share price decline from £46.05 to £32.50 at the January 20th market close of trading.
A few days ago, the business issued a trading update that pretty much coincided with some changes being brought to the search algorithm of Google. The actual Google ranking change of the websites, however, was done manually.
In a statement, the affiliate marketing company revealed that on January 18th, 2020 it became aware that several of its online casino sites have been downgraded manually by Google. The fact they had been moved to a lower position, has impacted the visibility of the websites and affected their traffic, and hence, the revenues generated from new visitors and customers.
At the time when this statement was made, the firm explained that it was too early to make a precise assessment of the overall financial impact of the demotion. XLMedia also noted that it was still unable to assess any further material delay of the rankings restoration in the future but explained that the downgrade of the online assets in question is expected to result in a corresponding reduction of adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) and revenue during the period.
XLMedia has shared that the rest of its online publishing assets were not affected by the Google ranking’s downgrade.