Buy The Dip In MeetMe

• Shares of MeetMe Inc MEET have surged 107.75 over the past  year, while declining 25.03 percent over the past five trading days.
• Roth Capital’s Darren Aftahi has maintained a Buy rating on the company, while raising the price target from $4.25 to $5.25.
• While mentioning that the recent weakness in the stock might be due to the selling by a large legacy shareholder, Aftahi said that the company continues to be one of the strongest fundamental stories.

Analyst Darren Aftahi elaborated, “With healthy mobile sales growth, an improving Adj. EBITDA profile, and an implied ‘16E FCF yield of ~14 percent, we would be aggressive buyers as we believe the weakness is not fundamentally driven.”

Aftahi also stated that the sell-off was overdone, creating an attractive buying opportunity. Although the market has been very volatile and directionally weak overall, the analyst attributed the recent sell off in MeetMe’s shares to the selling from a large legacy shareholder, rather than being fundamentally driven.

In addition, according to the Roth Capital report, the company’s implied free cash flow yield is becoming “very attractive” for a growth business, which MeetMe is.

Aftahi also sees the current stock valuation as attractive, given the expectations of mobile sales growth of 20 percent and expanding EBITDA margins in 2015 and 2016.

MeetMe has been included in Roth Capital’s Focus List for 1H2016.