WebMD Shares Post Biggest Drop Ever After Company Reduces 2011 Forecast
WebMD Health Corp. (WBMD) plunged the most ever after the medical-information company reduced its 2011 forecast for profit and sales, citing an anticipated decline in advertising revenue.
The shares fell $14, or 30 percent, to $32.48 at 4 p.m. New York time on the Nasdaq Stock Market. Today’s drop is the biggest since the company sold shares to the public in September 2005. The shares closed as high as $58.17 on May 2.
Advertising revenue in the second half will be reduced by unexpected delays or cancellations of promotions from several consumer-product companies, New York-based WebMD said in a statement today. Ads previously sold to drugmakers and consumer companies are going through extended legal and regulatory reviews, leading to unanticipated lags for introducing the promotions on WebMD’s site.
“When the indication is that there are multiple issues with respect to cancellations or delays that obviously raises a red flag,” said Scott Kessler, an equity analyst with Standard & Poor’s, in an interview. “These are not necessarily very short term issues.”
The company said 2011 revenue will be $580 million to $600 million, down from a May projection of $610 million to $640 million. Income from continuing operations will be $71 million to $80 million, down from a previous forecast of $79.8 million to $91.8 million.
WebMD’s site attracted an average of 104.8 million users a month and 2.17 billion total page views during the second quarter, the company said today, increases of 30 percent and 24 percent, respectively, from a year ago.
“While I am disappointed in our growth in the back half of this year, I am confident that the long term opportunity for WebMD is substantial,” Chief Executive Officer Wayne Gattinella said in the statement.
The company will be introducing new services designed to streamline the internal approval process for drug ads, he said, without providing additional detail.
“The second-half revenue outlook is worse than any WebMD saw during the recession,” said Mark Mahaney, an analyst with Citigroup Global Markets Inc. in San Francisco, in a report today. “Given certain softness in biopharmaceutical advertising and concerns around online direct-to-consumer and direct-to- physician marketing, the company could experience certain challenges to grow its revenue base.”
-- Editors: Lisa Rapaport, Jillian Ward
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