Millennial Media: An All-Around Attractive Play
By Tom Taulli, IPO Playbook
Millennial Media (MM) has been a horrible IPO so far. Since launching its offering back in March 2012, shares have plummeted from nearly $28 to a low of $5.87 before rebounding to current levels around $8.
Still, Millennial Media isn’t among the walking dead.
MM operates the No. 2 mobile ad network in the U.S., second only to Google (GOOG) and right ahead of Apple (AAPL). It’s gotten into this kind of league by building a standout platform that makes it easy to implement advertising systems into apps. The technology is available across 7,500 different device types, such as smartphones, tablets and even gaming systems.
Millennial has access to more than 420 million unique users across more than 42,000 apps. With this, the company has built a massive data-set of user profiles, which makes it easier to target ads based on demographics, behaviors and locations.
MM has a roster of blue-chip customers like Bank of America (BAC), IKEA, Nike (NKE), GM (GM) and Coca-Cola (KO). Those companies and others helped to drive strong performance in the most recent quarter, during which revenues surged by 50% to $49.4 million.
True, the company continues to lose money, but there’s hope in the form of a massive market opportunity. According to Gartner research, the mobile ad market is expected to spike from $3.8 billion in 2012 to $13.5 billion in 2015, or a compound annual growth rate of 65%.
In the short-term, Millennial Media is likely to benefit from a few catalysts, such as self-service ads (where MM already is seeing a nice uptake) and the growth of mobile video and the “co-viewing” trend, where people watch TV and tablets at the same time.
As far as the stock is concerned, its losses have translated into a much more reasonable 19 times forward earnings, plus the stock price might have a floor thanks to buyout potential as companies like Microsoft (MSFT) and Yahoo (YHOO) remain desperate to get a piece of the mobile market.
MM has all the elements of an attractive small-cap play. The technology is strong, the market is growing quickly and there is M&A potential — and investors can get a fair deal at current prices.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.