MeetMe's Preliminary Revenue Announcement Didn't Sit Well With The Street

MeetMe announced preliminary third-quarter revenues of $17.2 million, compared to the consensus of $17.2 million and guidance of $17 million–$17.5 million.

The acquisition of Skout closed on Monday, with Skout posting $6.6 million in third-quarter revenue and $26 million over the trailing 12 months. MeetMe had previously provided preliminary full-year 2016 guidance that included a fourth quarter contribution of $7.5 million in revenues from Skout.

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"We expect the company to be able to meet that target, with upside potentially coming from a seasonally stronger ad market as well as early integration with MeetMe which should provide marginal revenue synergies from cross selling, shared monetization strategies and greater scale," Loop Capital analyst Blake Harper wrote in a note.

Further Analyst Justification

Harper, who maintains his Buy rating and $9 price target on MeetMe stock, cut his FY16 revenue estimate to $74.9 million from $75 million.

The analyst projects revenue of $17.2 million for the third quarter and $28 million for the fourth quarter. The analyst sees third quarter/fourth quarter/full-year EPS of $0.11/$0.17/$0.45.

Moreover, Harper is positive on the Skout acquisition, which would boost MeetMe's international business. MeetMe said its combined MAUs would be "more than eight million," compared to an estimate of 8.5 million when the deal was announced.

"Including Skout, we estimate the company can reach 2.6 million mobile DAUs and 10 million mobile MAUs in one year from closing," Harper noted.

In addition, the analyst pointed out the company's profitable mobile business. MeetMe has over 90,000 advertisers through MoPub's mobile ad network and has had no issues filling inventory.

On the valuation front, Harper said the stock is selling at a discount valuation on 2017 estimates of 2.4x EV/Sales, 6.2x EV/EBITDA and 8.6x P/E.

"We estimate it can grow revenues almost 20 percent next year with EBITDA margins approaching 40 percent by increasing its combined mobile DAUs to 2.6 million from 2.2 million with modest monetization improvements," Harper added.

At last check, MeetMe was up 6.15 percent at $5.95.

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