Google Policy Changes Are Hurting Bankrate

RBC Capital's Rohit Kulkarni downgraded the rating on Bankrate Inc (NYSE: RATE) from Outperform to Sector Perform, while lowering the price target from $16 to $9.

While reporting a slight miss in its Q4 results, the company provided its Q1 guidance significantly below consensus, attributing it to changes in the products and policies of Alphabet Inc (NASDAQ: GOOGL) resulting in meaningfully lower traffic and reduced revenue visibility.

Bankrate's fundamentals deteriorated quarter on quarter in Q4, with revenues increasing 2 percent year-on-year, while decelerated from the Q3 levels. EBITDA margins fell year-on-year, leading to an 8 percent year-on-year decline in EBITDA.

"RATE's Q1 Revenue & EBITDA guides of ">$80MM"/">$20MM" are both materially below our/ Street expectations," Kulkarni said, adding that the company did not provide any guidance for 2016, "citing a lack of visibility due to Google product changes."

According to Bankrate, the policy and product changes impacting it include Google experimenting with its "Credit Card Compare," which caused "intermittent disruption" in Bankrate's organic traffic.

Google has also recently announced that it intends to discontinue "right rail" text ads on its search results pages, which has increased the uncertainty associated with Bankrate's traffic acquisition unit economics.

The analyst also believes that "execution challenges & technology improvements post-SEC investigation resolution in Q3:15 have not been fully addressed."

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