Can Martha turn her
businesses around?

At the company's flagship magazine, Martha Stewart Living, which makes up about a third of the company’s revenues, ad pages were down 47 percent last year, according to the Publishers Information Bureau. The magazine's publisher abruptly resigned this week.

That kind of news from a company is generally not a good thing for shareholders. But the reports have had relatively little impact on Martha Stewart Omnimedia stock — which has tripled since Stewart began serving her prison term for conspiracy and obstruction of justice in October. The stock’s surge has buoyed the spirits of millions of Martha loyalists, who are eagerly awaiting her starring role in a spin-off of reality TV show “The Apprentice.” But the hype has left Wall Street wondering loudly just how long it will take for the reality of Stewart’s business problems to set in with shareholders.

FREE VIDEO Too much of a good thing? March 2: Standard & Poor's Media Industry Analyst Gary McDaniel is among several Wall Street analysts who think the stock of Martha Stewart’s company is trading much higher then it should. CNBC

“In our opinion, (Martha Stewart Omnimedia’s) stock performance remains disengaged from the company’s fundamentals,” wrote Credit Suisse First Boston analyst William Drewry in a Feb. 23 report titled “This Stock Price Still in la la Land.”

That opinion is widely shared by Drewry’s peers. With Martha Stewart Omnimedia’s stock trading this week in the low $30s, the median target price among analysts who follow the company is just $7, according to those surveyed by Thomson First Call.

There is no doubt the frenzy of publicity surrounding Stewart’s release has been overwhelmingly supportive of the iconic promoter of the domestic arts. Much of the press coverage has centered on her indomitable spirit and the grace and dignity she has exhibited since her widely publicized felony conviction. By agreeing to serve her term before exhausting all legal appeals, Stewart hoped to put her three-year legal problems behind her and allow her to return more quickly to the task of rebuilding her company.

So far, the plan seems to be working. From the day of Stewart's conviction, public sentiment has apparently been strongly behind her. Demand for the latest news of her release is  insatiable. In the eyes of the law, and her fans, Martha’s rehabilitation is nearly complete —pending a five-month house arrest that allows her ample latitude (48 hours a week) to get back to her office, kitchen and greenhouse and continue where she left off.

That kind of public support and publicity would be invaluable if Stewart were running for Congress (assuming she can reverse her felony conviction) or promoting a book about her prison experiences. But there is no evidence of any of the hype surrounding her impending release increased public desire to whip up a batch of petit-fours or brush up on the proper way to prune privet.

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