Editor’s note: Part 1 was written before TFSM announces results | Part 2 (scroll down) written after results were announced.
Part 1: TFSM On Deck
I don’t own 24/7 Realmedia stock at the time, I did in the past, I thought of getting in when Google bought DCLK for $3.1B putting the entire online ad sector in the spotlight, but I did not due to my sizable chunk on aQuantive stock. Alas, aQuantive soared to $33, then got cut by an analyst, it fell back to $30 and then zoomed back up over $33.50 after its Q1 report, which saw an 87% spike in financials. Not bad.
I have no idea what TFSM will report, and this is not an indication to buy or sell, but consider this:
- On April 24th 2007: TFSM was at $8.48
- By May 3rd: it peaked at $12.37, largely on the speculation that MSFT would buy it for $1B.
Last Friday, MSFT was rumored to be buying YHOO for $50B, meaning that TFSM need not apply. The stock got cut by an analyst and it fell $1.20, but it’s still eerily close to the high range, at $11.20.
In light of MSFT/YHOO talks being off, then I guess TFSM is still technically being chased by MSFT. But if it’s not, and that does not happen, then TFSM will have to report really strong Q1 figures and up guidance, otherwise, it could be a rough manana for the shareholders of the stock.
Again, I have no idea what will happen, just pontificating.
Updated after TFSM announced results:
Part 2: TFSM Announces Results
I was not going to buy the stock after the recent runup, and I still have no clue how severe any rise or fall in stock will be (it’s currently up 1%, but that is a whopping $0.11), but in all fairness, the company did not do too bad at all.
According to the press release:
Revenues up year-over-year 34%, to $57.7M.
Losses shrank quite a bit to practically GAAP break-even:
Under generally accepted accounting principles (GAAP), net loss for the first quarter of 2007 was $0.1 million, or $0.00 per share. This compared to a GAAP net loss of $7.5 million, or $0.16 per share, for the first quarter of 2006.
I expect the stock to be up somewhat due to that, since the losses pretty much evaporated. Of course, sometimes post-market price changes don’t really kick in until later, I’d presume this one should be up more than 1%… so we shall see tomorrow.
But then you almost think the company throws in the towel/adds something to keep the speculators happy:
The Company confirmed that it is assessing strategic alternatives and announced that it has retained Lehman Brothers as its financial advisor to assist in the process.
That’s a cheap stunt. People know that MSFT and WPP are after you, why make it sound like you’re in a corner looking for a way out? I guess that’s because they need something, anything, to get the MSFT factor remain in the stock.
Of course, when you break into the segments, you see that 24/7’s display business (”media solutions”) is clearly not a leader per se, and that is the next growth of online advertising, and what MSFT needs more than anything else:
Revenue in the Media Solutions segment grew 13% to $20.6 million in the first quarter of 2007 from $18.2 million in the first quarter of 2006. Gross margins were 28.8% in the first quarter of 2007.
Search Solutions revenue advanced 61% to $28.7 million in the first quarter of 2007 from $17.8 million in the first quarter of 2006. Gross margins for the segment were 21.3% in the first quarter of 2007.
Technology Solutions revenue climbed 21% to $8.3 million in the first quarter of 2007 from $6.9 million in the first quarter of 2006. Technology gross margins, excluding stock based compensation expenses, were 80.1% in the first quarter of 2007.
Then again, with MSN/Live.com Search floundering, an injection of search mojo won’t hurt at all, but after seeing the market cap rise from $400M to $560M on a rumor, I wonder what the stock chart will look like over the next 3 months or so if no deal materializes. For what it’s worth, if TFSM can develop the Media Solutions unit, it can be worthwhile to remain independent for a while longer.
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