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Millennial Media Keeps Cooling Off

This recent rocket of an IPO is an important lesson for investors


In late March, mobile advertising operator Millennial Media (NYSE:MM) came public and nearly doubled on its first day of trading. But since then, the shares have reversed course, going from $27.90 to just under $14 in afternoon trading. In fact, the stock is trading near the original $13 IPO price.

The latest problem? Millennial Media issued a disappointing earnings report last night, knocking the stock down 13% to its current level.

Millennial Media is the No. 2 mobile ad network in the U.S. The top player is Google (NASDAQ:GOOG), and the No 3. operator is Apple (NASDAQ:AAPL).

In the first quarter, Millennial Media posted a 53% jump in revenues to $32.9 million, and its adjusted net loss came to 5 cents. The consensus was for revenues of $30 million and a net loss of 7 cents.

Millennial Media expects full-year revenues of $173 million to $176 million.  As for the Street forecast, it was for f $169.83 million.  But based on the fall in the stock, it looks like investors were still expecting more.

Given that the mobile space is still in the early years, it’s normal to see lots of volatility. Even Facebook has admitted challenges making money from its own enormous mobile traffic.

What’s more, the performance of Millennial Media’s stock is a good lesson for IPO investors. It’s usually best to wait a quarter or two before jumping into the stock. As seen with Millennial Media, a go-slow approach could mean getting a much better valuation.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”, “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.

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