Should You Buy It? Hang Up on R.H. Donnelley

R.H. Donnelley(RHD) cut its 2007 sales guidance Monday evening, causing at least two analysts on Tuesday to downgrade the yellow pages publisher. The stock fell $2.83, or 4.64%, to $58.11 on Wednesday.

Management cited poor advertising demand from the housing slump in the Florida and Nevada markets. Previously forecasting "modestly positive" advertising revenue growth this year, the company now expects sales to come in flat to down 1%.

R.H. Donnelley prints about 80 million directories each year, reaching about 30 states, including growing markets such as Phoenix, Las Vegas and Orlando. The company is now the third-largest publisher of yellow-pages books, following last year's purchase of Dex Media for $9.5 billion including assumed debt.

But in addition to the declining housing market, R.H. Donnelley is suffering from slower overall economic growth. And even if Ben Bernanke and the Fed can help stem this tide with the recent and potential future interest rate cuts, the company is also seeing a strong secular shift in advertising demand toward online properties and away from traditional print venues.

With that in mind, I'm here to answer readers' questions: Should you buy it? Has the selloff in R.H. Donnelley already reflected the decline in demand for the company's print advertising, or could the stock still fall further from here?