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Now that
the quarterly earnings season is winding down, it’s a good time
to take a look at who the top performers were. The markets
performance so far this month would indicate some pleasant
surprises were delivered. However, the truth is that most
companies saw analysts reduce their consensus estimates for the
remainder of 2008 and 2009 after their earnings reports.
The
markets positive reaction was due more to the fact that these
downward revisions were already priced into the stock prices and
in many cases turned out to be less severe than originally
expected. However, there were a few stocks that not only turned
in impressive quarterly performances, but saw analysts raise
their consensus estimates following their earnings reports.
Internet Brands
INET’s
online advertising business turned in a very strong performance
this past quarter and the company raised the low end of its
guidance for the full year. Organic traffic to the company’s
network of sites was a phenomenal 97%.
The
company has developed a remarkable business model which focuses
on acquiring under-monetized websites with strong organic
traffic. To date, the company has acquired 21 new sites this
year and continues to look for attractive targets. Some of the
recent acquisitions this past quarter will certainly enhance
their growth prospects as it allows them to enter into two new
large verticals: shopping and careers (lookout Amazon and
Monster).
Recommendation: Strong buy with a $10 price target.
Netflix
Netflix
recent quarter showed accelerating growth in their subscriber
base, while the cost for acquiring those subscribers declined.
We view this as a double positive, as more consumers recognized
the value of the Netflix service it allows the company to grow
at a more profitable pace (although I’m sure the Marketing folks
will probably claim the credit).
Netflix
seems well positioned to take advantage of the shift to
streaming video services. The ability to successfully transition
from a mail-order business could take this business to the next
level. In addition, with the exit of Blockbuster, Netflix has no
real competitive threat to be concerned with. These factors
which will allow for a more efficient marketing spend and lower
postage costs should drive strong bottom line growth in coming
quarters.
Recommendation: Buy with a $38 target price.
Bidz
Bidz
turned in one of the more impressive performances this quarter
and raised their full year guidance. The number of order jumped
13% with the average order value increased 7%. In addition, the
company was able to introduce its service to 65,000 new
customers which is important as the Bidz.com website is
addictive and tends to lead to repeat purchases.
Going
forward the company seems to have tapped a couple of new
initiatives which could produce big results. The company
recently launched a Spanish-version of their website and plan to
roll out additional language-versions in the near future.
Currently, international sales account for only 25% of total
sales, but it’s possible to see this growing to 50% in the
coming years. In addition, the company is beginning to exploit
the B2B market, as the company generated over $8M this quarter
from unexpected B2B sales. While these sales tend to be more
opportunistic, they could provide some significant upside in
future quarters.
Recommendation: Strong buy with a $18 price target.
At the time this article was published, the author only held a
position in Bidz.
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