Jefferies initiated coverage of Playboy Enterprises (PLA ) with buy and a $13.14 target.
Analyst Robert Routh says Playboy's recent restructuring should boost divisional profitability. He thinks the newly signed video-on-demand deal and reduced spending on entertainment programming should help real cash flow. While Playboy shares recently fell due to substandard performance at its entertainment unit, he thinks the stock has been overly punished, presenting an opportunity for investors.
Playboy also recently issued 5.2 million shares, which increased liquidity and helped position it to claw back $35 million of its $115 million in public debt, reducing annual interest costs. He sees 2 cents 2004 earnings per share, 35 cents in 2005, and 51 cents in 2006.