Second Quarter Earnings Preview: Internet Content Stocks

While finance departments at publicly-traded companies are working furiously to finalize their 2^nd quarter numbers, we at eChristianInvesting issue our first preview of internet stocks results.

Based on our analysis, we expect overall results to be rather disappointing for the Internet Content sector. The pattern will be missing consensus estimates are lowering guidance. We would even consider shorting Move, WebMD and Tech Target as they appear to be sure misses. On the positive side, there is a possibility of beats from Marchex and Travel Zoo.

Note: 2^nd quarter estimated revenue is based on consensus estimates.

Move

The weakness in the real estate sector has continued to hurt Move’s shares recently. Our expectations for their 2^nd quarter results are in line with the markets reaction. We expect revenues to be flat with the 1^st quarter with revenues coming in at $70-71M, well below the consensus of $73.6M. Until the share price moves closer to its 52-week low, we would not recommend owning these shares ahead of their earnings announcement.

Internet Brands

Although we continue to like Internet Brand’s business model, we see no compelling reason to take a position in this stock right now. We do expect INET to end the quarter with revenues of $25-25M which should meet Wall Street’s consensus of $25.7M. Macroeconomic pressures and INET’s large exposure to automobile and financial advertisers will undoubtedly continue to pressure this stock downward in the coming months.

The Street

We rate The Street a hold at this time as we expect them to merely meet expectations when they report their 2^nd quarter results. Our model predicts revenue of $19.2M for the quarter, slightly lower than the consensus of $19.6M. The real story here will be management commentary on their expectations for the remainder of the year.  

Marchex

Marchex shares continue to look overpriced when compared with the other companies in the internet content sector. That being said, Wall Street seems to have very muted expectations this quarter and Marchex is one of the few stocks who have a chance of beating their consensus estimates this quarter.

WebMD

If we were going to short a stock heading into the earnings season it would be WebMD. Consensus estimates call for strong revenue growth in the quarter which we think is contrary to what we are seeing in the current economic environment. Therefore, we are predicting that WBMD will miss consensus estimates and the subsequent market reaction will drive the shares much lower.

The Knot

The Knot represents one of the least cyclical of the internet content stocks. However, we expect that they also have felt some of the pressure of the flailing economy and weak advertising environment. It appears likely that they will miss their consensus numbers for the quarter. A narrow miss would provide a great buying opportunity as this stock looks like a good value at current prices. A large miss will send the share price dramatically lower.

Tech Target

While tech has held up better than many sectors, undoubtedly TTGT has been feeling the effects of advertisers cutting budgets. While they continue to provide high quality content that is attracting visitors to their network of sites, until the economy stabilizes and advertisers start spending freely again we see TTGT’s business continuing to struggle. Our recommendation is a sell ahead of what is likely to be disappointing earnings results.

Travel Zoo

Travel Zoo may be one of the few bright spots for the sector this earnings season. The company has spent the last few quarters investing heavily in expanding into Europe and Asia-Pacific. These expansion efforts have resulted in some very muted expectations from Wall Street this quarter. However, our checks indicate that there is a strong chance of TZOO beating revenue estimates for the quarter. The key variable will be how much the bottom line will be impacted by their international expansion costs.

Bankrate

Bankrate pre-announced disappointing 2^nd quarter results on July 8. Revenues are now expected to be slightly over $40M for the quarter. They also revised their full year guidance downward. While the shares will undoubtedly continue to be under pressure until we see some recovery in the financials, we continue to believe long-term in the fundamentals of this business.

At the time this article was published, the author held a financial position in The Street.

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