What a spike!

CONGRAT$$ TO WHO EVER IS STILL IN= YOU HIT PAY DIRT!!!

I'm in...

The correction has run very deep. It is now more than 22% below the recent high of $14.25, and has done much worse if one compares it to the 52 week high of $17.39 made in May. The earnings were better than estimates, but that did not help matters at all. The company beat the EPS estimates and the revenue guidance. Perhaps, a few more quarters of good performance can lead to improvement in sentiments for the stock. It is important to note that 2012 was better than earlier years as the revenues had grown and the loss had reduced. In 2013, going by the guidance, the revenue growth is expected to continue. For 2013, the guidance is for revenues in the range of $515-$520 million and adjusted EBITDA between $29.5-$31.5 million. Currently, the company carries a minor net loss on a ttm basis. For starters, it needs to beat the guidance for Q3'13 (revenue $130.5-$132.5 million, and adjusted EBITDA $6-$7 million). Growth in revenues is difficult as the company faces competition from the bigger players like Google (GOOG), Yahoo (YHOO) and Microsoft (MSFT). Social media sponsorship / native advertising is another fast growing segment with companies like IZEA (IZEA) doing well recently. The company needs to leverage the power of some of the high growth emerging trends. The competition makes it difficult for the margins to improve. So the hard work needs to continue and the new leadership may be expected to do something special to take the company to the next level. The good part is that it is a company close to breaking even. It has zero debt and a $81 million cash. So, after such a big correction, a few more good quarters can have a remarkable positive effect on the stock price. Hopefully, we will see a bounce from the current levels soon.

Despite improvement in fundamentals, and better than expected earnings for Q2'13, the stock has remained extremely weak over the past few days. It had shown a spike after the earnings, but has corrected significantly after that. It needs to bounce back quickly, as a cut below $12 will add to the weakness. In Q2'13, the EPS figure was better than analyst estimates. Company was able to do better than its revenue guidance, and the adjusted EBITDA came in at $7 million, above the guidance of $5-$6 million. The guidance for Q3'13 is for revenue in the range of $130.5 million to $132.5 million, and adjusted EBITDA in the range of $6 million to $7 million. For the full fiscal 2013, revenues is likely to be in the range of $515 million to $520 million, and adjusted EBITDA in the range of $29.5 million to $31.5 million. The revenues have been growing over the last few quarters, though the company is still not net positive on a ttm basis. In the first quarter of 2013, revenues had increased by 17% and the net loss had reduced significantly compared to Q1'12. The net loss had increased sequentially. In Q2'13, there was sequential growth in revenues, and the net loss also declined from $640K to $140K. On a half yearly basis, the revenues increased from $216 million in H1'12 to $249 million in H1'13. The net loss increased from $674K to $776K. It will be difficult for the topline to grow faster as the competition is pretty fierce. Social media sponsorship (SMS) / native advertising is also gaining popularity. IZEA (IZEA), a company in the SMS space, reported record Q2 numbers a few days ago. IZEA is also launching its Native Ad Exchange shortly. However, ReachLocal is close to break even, and it requires a few quarters of good performance to cross that important line.

Reachlocal has been a bit stable over the last few weeks. It has recovered about 7-8% from the recent low of ~$12. The stock had crashed 30% from the 52 week high made in May after the company lowered its Q2'13 guidance. However, it is still 30% above the 52 week low made in November, and seems to be waiting for the next major news flow or event to decide its course. Q2'13 earnings will be the next major trigger, and the company expects revenues of $124-$126 million and adjusted EBITDA of $5-$6 million. If it is able to beat the guidance, then the stock may get a boost, but in case of negative surprises, the stock may become weak. In Q1'13, revenues had increased by 17% and the net loss had reduced on a yoy basis. However, sequentially, the revenues were flat and net loss had increased. Still, the company seems to be well placed as compared with many other similar companies. It has improved its bottom line over the last three years, and is nearly break even on a net basis (ttm). Growth in revenues may not be that robust in the future due to increased competition from existing and emerging players. Online advertising is a very dynamic field, and even the advertisers are looking for new concepts to attract customers. Players like Google, Yahoo and Microsoft, Groupon, Angies List etc., provide competition in different segments. Companies like IZEA (IZEA) are emerging with focus on the social media sponsorship segment. One big positive with Reachlocal is that it is a zero debt company, and has good amount of cash. The company can leverage its brand strength to grow at a reasonable pace over the long term. The bottomline is also likely to improve over time if the company continues its focus on cost rationalization.

~ Monday! $RLOC ~ Earnings posted, pending or coming soon! In Charts and Links Below!

~ $RLOC ~ Earnings expected on Monday *
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One or more of many earnings sites has alerted this security has or will be posting earnings on or around the day of this message.








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*If the earnings date is in error please ignore error. I do my best.

ReachLocal, Inc. (ReachLocal) offers online marketing and reporting solutions, including search engine marketing, display advertising, remarketing and online marketing analytics, each targeted to the small and medium-sized businesses (SMB) market. The Company delivers these solutions to SMBs through a combination of it RL Platform and its direct, feet-on-the-street sales force of Internet Marketing Consultants (IMCs), and select third-party agencies and resellers. In February 2011, the Company acquired DealOn Media, LLC, a local deals company.

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