Focus Media Holding shares plunge after downgrades

On Monday, Focus forecast fourth-quarter adjusted earnings of 45 cents or 46 cents per share on revenue of $190 million to $200 million. That's well below Wall Street's average forecast for profit of 57 cents per share excluding items and revenue of $248 million, according to a Thomson Reuters poll.

"We faced an extremely challenging advertising environment towards the end of the third quarter and in the fourth quarter," said Chief Executive Tan Zhi, in a statement late Monday. "Our conservative fourth-quarter guidance reflects our current business expectation in such a difficult market environment."

American Depositary Receipts of Focus fell $8.23, or 51 percent, to $7.86 in afternoon trading, earlier trading at an all-time low of $7.81.

Susquehanna analyst C. Ming Zhao cut the stock to 'Neutral' from 'Positive,' saying Shanghai-based Focus is "facing strong headwinds from the worsening macro economy in China, as well as global financial crisis."

Citigroup analyst Jason Brueschke downgraded Focus as well, to 'Hold' from 'Buy,' saying in a note to clients that "near-term visibility in the current environment has diminished, and advertiser demand is uncertain."

Until there's better clarity on how long the ad slump will continue, "we cannot recommend buying the stock," Brueschke said. He slashed his price target to $18 from $53, but said the ad market should rebound in 2010 and he expects Focus to then report $1.3 billion in revenue.

Sterne, Agee & Leach analyst James Lee also cut Focus shares to 'Hold' from 'Buy.' He questioned the effectiveness of improved internal controls at the company, which posted lower-than-expected third-quarter revenue even after assuring analysts of key metrics in September.