Heads Turn for Playboy Shares, Adult Entertainment

Rhett Pardon
NEW YORK — Wall Street analysts are high on porn. And in particular, they see Playboy Enterprises as centerfold-attractive.

Barron’s, the nation’s leading business weekly, wrote this week that more value investors are turning their heads to Playboy.

"Sex sells; in the long run you'll make money at it," says analyst Dennis McAlpine of McAlpine Associates.

Mark Boyar of Boyar Asset Management and a long-time Playboy shareholder has been buying shares because they are trading well below the $22-a-share estimate the company is reportedly worth, Barron's said.

Shares of Chicago-based Playboy were trading Wednesday at $8.73 on the New York Stock Exchange.

"If you tell me I could buy Playboy for $275 million [the current market capitalization], I'd do it day and night," Boyar said.

With a strong brand, solid balance sheet and a time-honored strategy, the 50-year-old Playboy is seen as a winner on Wall Street despite disappointing second-quarter results, leaving the stock hovering above $8, more than 50 percent lower than at the start of the year.

Playboy reported a second-quarter net loss of $8.3 million, or 26 cents a share, worse than the 19-cent loss analysts expected and the year-earlier loss of $900.000, or four cents.

The entertainment unit, which includes the Playboy Channel, saw a 64 percent drop in operating income.

Even though the figures look dim, CEO Hugh Hefner has said the company will show a profit for the year.

McAlpine said that could be just a penny a share, but it would be a dramatic turnaround from 2003's loss of 31 cents a share.

Playboy has been getting mainstream attention this month due to an article on the founders of Google.

The article, which ran in the September issue, prompted the U.S. Securities and Exchange Commission to request additional information about the interview.

After its publication, Google said in a regulatory filing that its founders' involvement in the article may have violated U.S. securities rules governing its then-pending initial public offering.

In related news, Playboy on Wednesday posted to its website an unpublished portion from its interview with Google's founders.

In the excerpt, Google co-founder Larry Page talks about Google's management structure.

A Playboy spokeswoman said that the section was cut from the original piece due to space constraints and that no other significant portions of text were left out of the published article.