RBC Capital’s Earnings Preview: TUBE, P, YELP, GRPN
RBC Capital Markets analyst Mark Mahaney and his team weighed in on a variety of small-mid cap Internet stocks on July 19 in light of each company’s upcoming earnings results. Find out what the analysts advise investors to look for in TubeMogul Inc. (TUBE), Pandora Media Inc. (P), Yelp Inc. (YELP), and Groupon Inc. (GRPN):
TubeMogul Inc
TubeMogul is a company that offers an enterprise software platform for digital video advertising. The company will post second quarter 2015 earnings results in August and is estimated to post a loss of ($0.18) per share and $39.16 million in revenue, down from a loss of ($0.09) per share but up from $28.72 million from the same quarter last year.
RBC Capital expects TubeMogul to post a loss of ($0.18) per share but forecast slightly higher revenue of $39.7 million. The analysts also believes the Street’s Q3 and 2015 estimates for TubeMogul “are reasonable” but have a “greater likelihood of… nudging higher post-Q2 earnings.”
RBC reiterates an Outperform rating on TubeMogul ahead of the company’s earnings for the following reasons: “1) TUBE operates at the intersection of Online Video & Programmatic Advertising (fastest growing Online Advertising segments); 2) TUBE has access to more inventory and its ad spend is larger and faster growing than traditional video ad networks; 3) TUBE’s focus on transparency, self-service, and analytics has led to a differentiated and sticky technology solution; & 4) TUBE is well-positioned to benefit from the shift of TV ad dollars to online channels and the programmatic purchasing of TV ads.”
Out of 5 analysts polled by TipRanks, all 5 are bullish on TubeMogul. The average 12-month price target for TubeMogul is $21.60, marking a potential upside of 42.11% from where the stock is currently trading. On average, the all-analyst consensus for TubeMogul is Strong Buy.
Pandora Media Inc
Music streaming website Pandora is slated to announce second quarter 2015 earnings on Thursday, July 23 after market close. On average, analysts expect Pandora to post earnings of $0.02 a share and $283.19 million in revenue, down from $0.04 earnings per share and $218.89 million in revenue year-over-year.
RBC Capital’s Q2 guidance is slightly lower than the Street’s, predicting a loss of ($0.02) a share and $282 million in revenue. The analyst believes the main focus for Pandora’s Q2 earnings should be user growth and engagement, citing that “Pandora Active Users and Listening Hours are continuing to grow at reasonable paces, though they are clearly slowing as the law-of-large-numbers takes hold.” Additionally, “Pandora’s share of total U.S. Radio Listening Hours is also continuing to grow, making the platform an increasingly important medium for local ad buyers, which we believe is a positive for the stock.”
Mahaney and his team reiterate an Outperform rating on Pandora with a price target of $25 as they continue “to see Pandora executing well (radio hour market share gains, continued RPM growth & Content Cost leverage) despite the presence of an increasingly strong competitive set (incl. Spotify and Apple Music).” Mahaney added, “The building out of the local ad salesforce, continued integration into Q2 Earnings Preview for the Small-Mid Cap ‘Net Stocks mainstream radio ad-buying platforms, and increasing marketing spend will all combine to continue growing Mobile monetization and consumer usage, which should give Pandora leverage against a very high, fixed-cost licensing structure.” Overall, the analysts view “Pandora as having significant strategic value… and [thhe] continue to view the risk/reward on P shares as highly asymmetrical.”
Out of 17 analysts polled by TipRanks, 12 analysts are bullish on Pandora and 5 are neutral. The average 12-month price target for Pandora is $22.38, marking a potential upside of 60.32% from where the stock is currently trading. On average, the all-analyst consensus for Pandora is Moderate Buy.
Yelp Inc.
Yelp is slated to post second quarter 2015 earnings results on Tuesday, July 28 after market close. The street estimates Yelp will post Non-GAAP earnings per share of $0.16 and $133.48 million in revenue, while RBC predicts the company will post Non-GAAP earnings of $0.20 a share and $134 million in revenue.
The key items Mahaney and his team say to focus on in Yelp’s Q2 report are local advertising accounts, local advertising revenue, unique visitors, adjusted EBITDA, and mobile data points.
While Mahaney and his team view “YELP as a top-of-funnel, strong-brand unique asset with downstream transaction capability,” they maintain a Sector Perform rating on the stock with a $50 price target, noting, “transaction capability could take a long time to play out.” Mahaney further validates their rating with the fact that Yelp’s younger markets “are generating revenue dramatically below the level of Yelp’s older markets” and that “Yelp’s [international] markets have yet to break out of the 3% contribution range, and now [international] Unique Visitor numbers have flat-lined.” Although RBC sees “strategic value to YELP,” it “isn’t enough to keep [them] from staying on the sidelines.”
Out of 22 analysts polled by TipRanks, 11 analysts are bullish on Yelp, 1 is bearish, and 10 are neutral. The average 12-month price target for Yelp is $53.50, marking a potential upside of 54.85% from where the stock is currently trading. On average, the all-analyst consensus for Yelp is Hold.
Groupon Inc
Coupon website Groupon will announce second quarter 2015 earnings in early August and is expected to post Non-GAAP earnings of $0.03 a share and $740.25 million in revenue, up from $0.01 earnings per share but down from $751.58 million in revenue year-over-year.
RBC’s EPS projections are in line with the Street’s estimate of $0.03 a share, but the firm expects higher revenue of $744 million. One factor the analysts say to focus on in Groupon’s earnings is the relationship between direct and third party revenue “as the shift to direct revenue (Groupon Goods) places pressure on consolidated margins.” Another factor that RBC says to focus on is EBITDA margin trends, forecasting “a Q2 EBITDA margin of 9.2%, down from 9.6% in Q1:15.”
RBC maintains a Sector Perform rating on Groupon, remaining cautious of “the company’s long-term ability to successfully expand into the Goods and Travel segments, especially given the competitive landscape and well-entrenched competitors – AMZN, EBAY, BABA, PCLN, EXPE.” Mahaney and his team add, “However, the company appears to be making progress against its operating goals. Plus, current valuation is ballpark reasonable.”
Out of 13 analysts polled by TipRanks, 7 analysts are bullish on Groupon and 6 are neutral. The average 12-month price target for Groupon is $8.50, marking a 67.65% potential upside from where the stock is currently trading. On average, the all-analyst consensus for Groupon is Moderate Buy.
Mark Mahaney currently has an overall success rate of 66% recommending stocks and a +24.4% average return per recommendation when measured over a one-year horizon and no benchmark.
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