Updated with Tuesday trading activityNEW YORK ( TheStreet) -- The severe market reaction to Monday's below-consensus outlook from DG FastChannel ( DGIT) may be more a product of overheated expectations than a deeper problem with the Irving, Texas-based provider of digital media services. "
In its statement announcing the outlook, DGFastChannel said the HD business was "strong" and pricing was "stable." Oppenheimer & Co. analyst Jason Helfstein, who has an outperform rating on the stock, noted that the company's full-year outlook for EBITDA
earnings before interest, taxes, depreciation and amortization of $105 million to $107 million on revenue of between $230 million to $234 million doesn't look so bad when compared to what he was forecasting prior to the second-quarter report. "Based on our estimates prior to better 2Q results, revised revenue guidance is in line, and EBITDA is 5% ahead," he said in a note. DGFastChannel attributed the view for third quarter, where it now expects to report revenue of $51 million to $53 million vs. the current Wall Street consensus view of $61 million, to normal seasonality, which it said was masked a bit by the strong second quarter, as well as short-term pressures from the transition of its Pathfire syndication business to a retail model from wholesale. Oppenheimer's Helfstein said this switch should be beneficial in the long run. "While investors' confidence in management is clearly shaken, as demonstrated by the recent price action, the step should bring some stability to the share price," he said, noting that his earnings estimates and 12-month price target of $50 for the stock are now under review. Anticipating the market's reaction to the outlook for the second half would be ugly, DGFastChannel's management team tried to cushion the blow by unveiling a $30 million buyback program along with the bad news. "We believe this share repurchase program is a good use of our cash, reflecting our strong belief in the value and opportunity for DG FastChannel," said Scott Ginsburg, Chairman and CEO, in the press release. Oppenheimer's Helfstein was cheered a bit by the buyback, and said possible positive catalysts for the stock from here could include any comments at upcoming Fall investor conferences about ad trends for the fourth quarter, and the beginning of the political spending season. As glum as CEO Ginsburg likely is about Monday's sell-off, there is a slight bright side to the share price action: That $30 million buyback is going to go a lot further now. -- Written by Michael Baron in New York. >To contact the writer of this article, click here: Michael Baron. >To submit a news tip, send an email to: firstname.lastname@example.org.