AirMedia shares fall on liquidity concerns

Shares of AirMedia Group Inc. fell Monday after an analyst raised concerns that the company may run out of cash in four to six quarters.

Susquehanna Financial Group analyst C. Ming Zhao said AirMedia is "burning cash at an accelerated pace." He said second-quarter cash outflow was $29 million — $17 million from operations while $12 million came from capital expenditures and an acquisition. That leaves the company with net cash of $138 million, or $1.73 per share.

Unless the company can borrow money from banks or raise capital in the financial markets, AirMedia may be forced to give up contracts at major airports, he said in a research note.

AirMedia operates digital TV screens that display ads in airports and airplanes. Executives for AirMedia could not be immediately reached for comment.

The analyst downgraded the stock to "Negative" from "Neutral," with a price target of $4.50, implying downside of 37.8 percent from its closing price Friday. He believes AirMedia will continue to report quarterly losses until mid-2010.

Zhao cut his 2009 revenue forecast by 6 percent to $152.1 million and his loss estimate was widened by a penny to a loss of 28 cents per share. But the analyst raised his 2010 forecast by 9 percent to $209.2 million, boosted by ad sales in its gas station network. He expects the company to lose 4 cents per share in 2010 instead of earning a 17-cents per share profit.

American Depositary Shares of Beijing-based AirMedia fell 16 cents, or 2.8 percent, to $7.04 in afternoon trading.