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.
