Gaiam, Inc. (GAIA)

TMFEldrehad (99.99) Submitted: 12/12/06 2:44 PM : Start Price: $12.16 GAIA Score: -16.17

My first re-up here, but here's my original pitch which I penned back in August:

I just love going against the coffee clutch, alternative energy, organic food trend. Calling underperform on fuel cells, ethanol, and Whole Foods Market has done good things for my CAPS rating, so when I stumbled across this company how could I pass up one more opportunity to thumb my nose at the Kum-bay-yah crowd?

Oh, and hey, the fact that this company is overvalued is icing on the cake!

According to the most recent earnings release, revenue nearly doubled, but that was largely due to the aquisition of the Good Times media titles. Now, read a little further and you'll find that GAIA's share of the fitness/wellness DVD category is sitting at 47%. So, the part of the business that, by far, grew the most now sits at a nearly 50% market share (leaving another 50%, at most, to go) - and GAIA sports a trailing P/E of nearly 100. Rather hard to grow into that kind of valuation when you are already sitting atop a nearly 50% market share, isn't it? Need another hint? Okay, revenue for the first six months of '06 clocked in at $94.9M, and the company stated that it expects to surpass the $200M revenue mark this year.

Really? Generate $200M in revenue for the year, including the holiday quarter, when the first half clocked in at $95M? Now that's the stuff 100+ P/E companies are made of! (Not!)

No worries though. When the bottom finally drops out of this one maybe the company can send out some aromatherapy oils to its shareholders to help ease the pain.

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