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The Knot is
scheduled to report their fourth quarter 2008 results after the
market closes on Thursday, February 12. Based on our analysis,
we at
eChristianInvesting are expecting KNOT to report inline
results that meet Wall Street’s expectations.
Analyst Expectations
We are
forecasting revenues of $24.8 million and EPS of $.03. This
would represent a 3% growth in revenues from last year’s $24.2
million in the same period. The current analyst consensus calls
for revenues of $25.0 million and $.03 EPS. On November 6, the
company updated its full year revenue guidance which implied
fourth quarter revenues of $24.2 – 26.1 million.
The Knot
continues to establish itself as the clear #1 online wedding
portal. The company announced that last year they registered 1.9
million new member – representing 85% of all brides in the U.S.
Our checks show that traffic growth continues to be strong
across the companies expanding network of sites.
However, the
bad news is that the company is operating in the face of strong
economic headwinds. The Knot relies on display advertising for a
majority of their revenues and it is clear that prices are
dropping for this inventory. We would expect evidence of the
declining levels of traffic monetization to become apparent in
the fourth quarter results.
2009 guidance
(assuming management will continue providing this) will be even
more tempered. It is unlikely that the company will be able to
raise rates at all this year like they have in years past. Heavy
discounting may be required in 2009 in order to convince
advertisers to keep spending.
Share Performance
The Knot’s
shares are up 11% since the beginning of the year. In 2008, the
shares took a severe beating – dropping 48% compared to the Dow
Jones index’s 34% drop.
Valuation
Shares are
now trading at 33x consensus 2009 EPS estimates. This is above
the relative valuations of their peer group. We would expect
shares to drop further following the company’s quarterly results
and announced 2009 guidance.
Recommendation: Sell with a $6 price target.
At the time this article was published, the author did not have
a financial position in any of the stocks mentioned in this
article.
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