3Q Earnings: TheStreet.com Should Beat the Street

TheStreet.com (TSCM) is scheduled to report third quarter 2008 results after the market closes on Wednesday, October 29. Based on our analysis, we at eChristianInvesting are expecting TSCM to report better than expected top-line results that beat Wall Street’s consensus expectations.

Analyst Expectations

We are forecasting revenues of $19.9 million and EPS of $.07. This would represent a 24% increase in revenues from last year’s $16.1 million in the same period. The current analyst consensus calls for revenues of $19.2 million and $.06 EPS. The company has provided no guidance. While The Street’s business is clearly linked to the capital markets, we believe that the company will be able to post decent quarterly results since 45% of revenues come from non-financial advertisers. In recent quarters, the company has begun to expand its online presence with MainStreet.com, Promotions.com and other web properties.

Share Performance

The tumultuous market conditions this year have resulted in TSCM’s shares dropping an excessive 76% to date. In October alone, the shares have fallen 36%. We believe that the recent sell-off is due more to the market’s pessimism rather than the underlying fundamental value of the company. The S&P 500 is also down an astounding 25% this month.

Valuation

Shares are trading at a compelling 12x consensus 2009 EPS estimates. This is a steep discount to the relative valuations of their peer group. With close to $3 in cash and no debt, we see little downside risk for this profitable company at the current valuation levels.

Recommendation

Buy with a $6 price target.

Disclosure: Author holds a long position in TSCM

Comments

[bsanders:]

A couple things to consider...

You state "45% of revenues come from non-financial advertisers".
True, but much of the remaining 55% ad revenue comes from industries that are hurting as bad as financials. Automobiles for example.

Also... You state "close to $3 in cash and no debt".
Most of the cash on hand ($55 mil of it) came from a preferred stock offering that is not on the balance sheet. It is a liability that you should be aware of.

That said, I did buy some shares monday. The terms of the preferred share offering have become very reasonable and the overall trend in advertising is shifting to the online market. TSCM has a competitive advantage in attracting affluent eyeballs due to content and that goofball Jim Cramer. They seem to get the importance of vidio content.

2008 Oct 28 10:43 AM

[Hedged In:]

It would be good to see a follow up article explaining what went wrong, with a forecast for the rest of the year.

2008 Oct 29 06:33 PM