Oppenheimer's Schwartz Downgrades Constant Contact: 'Lingering Issues Impede Catalysts'

In a report published Friday, Oppenheimer analyst Brian Schwartz downgraded the rating on

from Outperform to Perform. Analyst Brian Schwartz believes that issues related to Constant Contact's lackluster performance in the first half, with lower conversion rates, products branding transition and slower ARPU growth, "are likely to continue for several more quarters and push out realization of a recovery/reacceleration story that could drive multiple expansion." "We do see valuation support near current price but move to the sidelines on the stock for a lack of catalysts and near-term story," Schwartz added. Constant Contact reported March 2Q results with total revenues of $91.5 million, up 13 percent y/y, but short of consensus expectations. The company's PF EPS for the quarter at $0.29 beat the consensus expectation of $0.22. The 5,000 net new subscribers, down 50 percent y/y, was the lowest addition in 11 quarters. The SAC came in at $709, rising above $700 for the first time in 11 quarters. The company has guided to 3Q revenues of $92.6-$93.3 million, up 11-12 percent y/y, but below the consensus estimate of $94.1 million. The PF EPS guidance of $0.37-0.39 also missed the consensus expectation of $0.40.