Roth Capital Downgrades Constant Contact To Sell

• Constant Contact Inc CTCT shares have jumped 28 percent in the last one month, even after touching a low of $24.13 on October 21.
• Roth Capital Partners’ Richard K. Baldry downgraded the rating on the company from Neutral to Sell, with a price target of $32.
• The 3Q sequential revenue growth was the smallest in the company's history and it may not be worth holding shares till the deal is consummated, Baldry said.

Constant Contact has agreed to be acquired by Endurance International Group Hldgs Inc EIGI for $32 per share in an all-cash transaction.

The company reported its 3Q15 revenues at $91.9M, significantly short of the Roth estimate of $93.1M, remaining flattish with the $91.5M figure reported for 2Q15. “We looked back and in the past ten years this was the smallest sequential increase in the company's history,” analyst Richard Baldry noted.

These results are unlikely to have a meaningful impact on Constant Contact’s trading valuation, which now focuses on the acquisition price, Baldry commented. He added, however, that if the deal were to fail for any reason, the shares could suffer a severe hit, “with downside potentially well below its pre-acquisition trading levels.”

Baldry believes that the upside to holding Constant Contact’s shares till the time the deal is consummated or in anticipation of a higher offer, which is unlikely to materialize, does not seem “worth the downside risk any longer.”

“Given the consideration offered for CTCT, we believe other "turnaround" or value-oriented names in the space should be viewed as more attractive,” Baldry said, citing companies like LivePerson, Inc. LPSN, Interactive Intelligence Group Inc ININ and Tangoe Inc TNGO, all of which are rated Buy.