TRMR – Earnings Earthquake Rattles Tremor Video

This morning isn’t just bad for Tremor Video (TRMR) … it’s downright brutal. TRMR started the day above $9, and is sitting below $5 — good for 47% losses and a massive headache for Tremor Video stock holders.

TRMR, which came public back in late June at $10 per share, operates a video advertising network. It is a full-blown system that has coverage for desktops, smartphones, tablets and even connected TVs. And at the core of TRMR is rich analytics system that helps with engagement (the interaction of a viewer with a video ad), brand lift and time spent.

But right now, business is bad. In Q3, Tremor’s revenues rose just 17% to $35.3 million, shy of analyst expectations for $36.26 million, while Tremor Video earnings were 5 cents in the red — a loss that was 3 cents worse than expected.

TRMR sales for Q4 and the full year are forecast to come up shy as well. Fourth-quarter revenues are expected to be in a range of $29.5 million to $30.5 million vs. analyst targets for $38.55 million, and FY2013 expects revenues of $125 to $126 million, shy of a consensus for $135 million.

Oppenheimer responded by downgrading Tremor from “outperform” to “market perform.”

So the hammering of TRMR is no surprise. But what’s behind Tremor’s deceleration?

One reason is that advertisers and agencies are moving toward so-called programmatic buying. This means they do not necessarily want hands-on services for putting together campaigns, but instead an automated system to place ads. While TRMR has launched its own system, it probably will take some time to get traction.

Tremor Video also is lagging on the mobile front, where TRMR gets only 9% of revenues.

TRMR also must deal with mega companies like Google (GOOG) and Apple (AAPL), which control their own platforms, as well as a spate of other smaller operators that are gunning for the market including YuMe (YUME) and BrightRoll.

The market opportunity for video is huge — according to eMarketer, the online video ad market is expected to increase by nearly 29% per year until 2016, reaching $8 billion at that point. However, it has attracted a large number of competitors, many of which have substantial resources and top-notch technology platforms.

That means there will be losers along the way. Today, at least, Tremor Video is among the worst of them.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll 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.

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