Comscore Inc. (SCOR)
Successful businesses catering to the individual consumer are realizing that they must devote marketing dollars to online campaigns in order to remain competitive. However, it is often difficult to convince management to spend these resources without being able to measure return on investment and justify this type of allocation. Comscore (SCOR) is the market leader in consulting with companies to determine the best way to set up such a marketing campaign and determine its effectiveness.
While the company has only been public for a couple of months, the history of the business goes back a few years during which time the company has built up a nearly 60% market share in the US market for web traffic data and analytics. Its primary comptitior is NetRatings with less than 40% of the US market, but ad server firms such as VCLK (see July note) and AQNT also provide competition. Still the company has an impressive domestic stable of clients including 85 of the Fortune 1,000 companies, and naming such all-stars as MSFT, YHOO, and GOOG.
SCOR has also begun to expand internationally and while it has decided to focus on the US, it recently increased its portion of revenue from overseas to double digits and expects international markets to continue to play an increasing role in the company’s growth. The company has noted several key initiatives to grow its business over the next few years. Comscore plans to:
- Deepen current relationships
- Grow its customer base
- Expand its intelligence platform
- Address emerging media types
- Expand its technology leadership
- Build product awareness (through media exposure)
- Grow internationally
One statistic that points to their success as far as awareness goes is that there were nearly 20,000 citations of the company’s products or services in publications from May 2006 through April 2007. That is a LOT of free publicity.
There are some challenges investors will have to face over the next year. At this point, 66% of the stock is owned by insiders and there is a lockup period restricting those shares. December 26, the lockup begins to expire and this could provide an overhang to the stock price. Also, changing technology may cause difficulty as traditional measures of traffic and clicks may become obsolete as java platforms that automatically refresh pages are harder to quantitatively analyze. Still, the company has a proven track record of innovation and it would be uncharacteristic of them to not adpt with the changing environment.
The stock is not cheap at 26 times consensus 2008 earnings, but Jefferies estimates revenues should grow 26% over the next 5 years. I think it is worth beginning a small position at this level and then adding to it as the picture becomes clearer and a better trading pattern asserts itself. Volume may dry up to give this name less liquidity. If this happens, investors should be careful not to get too deep in the name where it would be difficult to liquidate a position if they are stopped out. Still, the opportunity appears to be attractive given the risk apparent at this time.
FD: Author has a long position in SCOR
Additional Reading:
Press Release: comScore named fastest growing blobal market research firm
well written article.
August 14th, 2007 at 6:17 pmmr. cfa.. question on the finacials. for tuesday the industry group was dumped again to new low points. Goldman Sacs declined to $169 a new low point. what are your thoughts on dip buying this or blue chip-ish similiars? my inventory is zero, i missed buying GS @ $180 due to buying power delays. now the dip sweetens to $169, thankgod, and the dip is rich and generous $70.00 CASH. is now a good time to begin to build a position or is this subprime and finacial industry slump open-ended and worsening for all companies involved?
what bounce potential, if any, would GS or the others have?
Hey Boris - sounds like you dodged a bullet!
August 14th, 2007 at 8:41 pmI understand your desire to get into GS - they are a great company for the most part and have an excellent history of making money. I am concerned, however, that we don’t know the whole story yet. There have been plenty of skeletons found in the closets but not all the doors are open which is why these financial stocks keep falling. Also you have dip buyers (such as yourself) that have gotten trapped in these names and are capitulating and selling either out of discipline or because of margin calls. I would wait to see some strength before buying and while you may miss the first 10 points of a 40 point move, you’ll be less likely to get clipped for 20 or more on the loss side.
scor might have more rapid bounce velocity if the price sweetens to lower 21s or better. stake your GTC limit order.
August 14th, 2007 at 10:23 pmGS falls another $5 to $164. havent taken optimization action yet but this is gettin crazy.
August 15th, 2007 at 9:31 pmfor monday afternoon, SCOR breaks below $22. pick your price point.
August 20th, 2007 at 3:32 pmI already have a piece - as disclosed in my article. I expect that it will hold up here at $22 but if not, we could see a good bit of decline before buyers step in to support the stock. Be careful - its a thin name!
August 20th, 2007 at 4:05 pmStock Market Information…
I couldn’t understand some parts of this article, but it sounds interesting…
September 21st, 2007 at 8:02 pmZach,
Nice website. Comscore did fall back from its 22-27 post IPO shoot as I thought it might. But it was well caught above 20. Now that the analyst estimates are out the price can be better assessed. It has had quite a run-up so far and it is nice to see that 4-5 analysts are covering it (some new IPOs as I’m sure you’re aware have 1 or 2 only).
Without outside news or attention I think with a PEG estimated at 1.5 as of today, given the still murky future (with high potential upside but still unclear as to how exactly it will play out), the price in my opinion may stick around 30 and at times drop below on dips. I’m personally going to watch it closely and otherwise wait for the first cc to pull the trigger. I understand why some would put some down already, especially on any pullbacks.
Best wishes to us both on this company.
Regards,
September 28th, 2007 at 1:40 amJon
…I hope you got GS back when Boris was complaining about 170; its been on fire lately at 228
October 8th, 2007 at 2:02 pm[…] DKS MF TKC UA AFSI OWW HURN BTJ CRNT NTRI BLOG FMD LKQX AAPL NUE EMC COH ATHR CTSH NTGR DECK WFR SCOR MCO VCLK PNK LM STAR TPX STP CPLA MTOX ACM TLM NVEC BARE RIMM ATV TSL BSC BLUD KMX KNOT QSII CBG […]
April 7th, 2008 at 5:49 pm