Mood Media Guides Higher, Versant's Liston Says The Stock is a BUY

The Puma concept store in Paris. Puma tapped Toronto's Mood Media to deploy a digital signage network that consisted of four video walls.

Some upbeat news from Mood Media (TSX:MM) today as the Toronto-based company said its Q4 EBITDA would come in at approximately $34-million.

Versant Partners analyst Tom Liston is impressed with the guidance, he had expected EBITDA of $29.7 million. Liston says he suspects the better performance is a combination of improved cost controls and revenue growth driven by the visual side of Mood Media’s business in North America. The Versant analyst also believes the company is doing well at engaging customers such as the TJX Companies which owns, among other names, T.J. Maxx, Marshalls, Winners, and HomeSense,

Last May, Mood Media completed the $345 million acquisition of Muzak, forming an entity that has $400 million in revenue in what is now being referred to as the sensory branding space. Sensory branding is a term for marketing tactics now being used by giants such as Nissan, Pizza Hut and Starbucks.

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A comprehensive 2005 Martin Lindstrom study published in the Journal of Product & Brand Management called “Broad Sensory Branding”, revealed that 99 percent of all brand communication at that time focused on just two senses; sight and sound. But emotional connections, says the paper, are made with a combination of all five senses. Those brands that communicate with a “multi-sensory brand platform have the greatest likelihood of forming emotional connections between consumers and their product” said Lindstrom.

Liston’s target is based on eight times what he believes fiscal 2012 EBITDA will be. The stock, he says, is currently trading at six times that number. In a research update this morning, the analyst maintained his BUY recommendation and $4.75 one-year target.

Mood Media will release the results in the first week of March. The stock closed today up 21% to $2.85.