CTC Media Returns to NASDAQ Q-50 Index

CTC Media (CTCM US) was included in the NASDAQ Q-50 Index on Friday after trading hours. The index follows the performance of the 50 stocks in line to replace those currently included in the NASDAQ-100 Index and is tracked by PowerShares NXQ Portfolio ETF (PNXQ UW).

The news are definitely positive for the company. We gauge we might see some positive reaction to the news. On March 12, when NASDAQ announced the removal of CTCM from the index, the stock lost almost 9% over the next four trading sessions, while the MSCI Russia Index was flat.

CTC Media is up strongly since September 1 (over 11%), when it announced the termination of its current ad sales contract with Video International, which envisions fees of 12%-13% of revenue; however, the exact benefits of CTC Media’s new relationship with its ex-sales house are unclear. CTCM intends to use Video International’s consulting services, but the cost of these services and expenditures for its own sales team have not been announced. We there- fore believe the market overreacted somewhat this month, but continue see CTCM as very at- tractive fundamentally, as it still offers a solid 35% upside to our target price.

We consider CTC Media to be well valued stock capable moving upside till the end of the year, hence we keep our buy recommendation.