Bankrate Earnings Preview: First Quarter 2009
Bankrate [[RATE]] is scheduled to report their first quarter 2009 results after the market closes on Thursday, May 7. Based on our analysis, we at EarningsPreviews.com are expecting RATE to report disappointing results that fail to meet Wall Street’s consensus expectations.
We are forecasting revenues of $40.2 million and EPS of $.31. This would represent a 5% decline in revenues from last year’s $42.46 million in the same period. The current analyst consensus estimates calls for revenues of $40.5 million and EPS of $.33.
After reporting surprisingly strong third quarter results, Bankrate’s fourth quarter earnings came in below Wall Street’s expectations. Even since February, analysts have continued to revise their first quarter estimates downward on fears of a declining advertising market. While our checks show strong traffic growth in the quarter, there appear to be fewer advertisers on the site and preliminary reports show CPM’s falling over 10% in the Finance vertical. In addition, it seems as those mortgage lenders have been inundated with re-finance applications in recent weeks and have little need to generate additional volumes through advertising.
Since the beginning of the year, Bankrate’s shares have fallen hard – down over 31%. In 2008, Bankrate’s shares fell only 21% on hopes that the company would be less impacted by the downturn in online advertising.
Shares are now trading at 15x consensus 2010 EPS estimates. This is a discount to the relative valuations of their peer group. While we expect that Bankrate’s shares will trade lower if in fact they do report disappointing quarterly results, we would be buyers below $20 as this stock has tremendous long-term growth potential.
Recommendation: Hold with a $25 price target.