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Why SFX Entertainment Inc Shares Plunged Today

By Steve Symington - Mar 27, 2014 at 7:40PM

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Is SFX Entertainment's drop meaningful? Or just another movement?

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 SFX Entertainment Inc (NASDAQ: SFXE) plunged 11.6% Thursday after the company turned in lower-than-expected quarterly results.

So what: Quarterly revenue was $84.2 million, which translated to a net loss of $39.2 million, or $0.48 per share. Analysts, on average, expected SFX to post earnings of $0.06 per share on significantly higher revenue of $112.85 million.

Now what: CEO Bob Sillerman remained optimistic, noting the number of major festivals already scheduled in 2014 is "in excess of 65," or a 20% increase overall of 2013.

In addition, though SFX doesn't provide forward guidance, Sillerman did say their marketing and sponsorship initiatives have already booked more than $40 million of 2014 partnership EBITDA in the first three months of this year. By comparison, SFX turned in adjusted EBITDA of $23.6 million for all of 2013.

From a long-term investor's standpoint, however, I'm still not particularly intrigued by this small, yet-to-be-profitable company. For now, I prefer adding SFX Entertainment to my watchlist to keep tabs on it during the next few quarters. I could miss out on some short-term gains if SFX shows any progress toward achieving sustainable long-term profitability, but in the meantime, there are plenty of other promising companies out there in which investors can put their money to work.

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