Autobytel: On the Road to Nowhere (ABTL)

Shares of Autobytel (NASD:ABTL) moved down close to their 52-week low after the online car marketing company announced Q1 06 numbers for the period ending March 31. Revenue declined 13% from $33.3 million last year to $29.1 million. The company's loss from operations rose to $8.9 million from $3.0 million a year ago.

Autobytel's inability to grow is puzzling. Its brands, which include autobytel.com, car.com, carsmart.com, and autoweb.com, are well known in car purchasing circles. According to Alexa, autobytel.com gets about 20 million page views a day. The company said that as of the end of the quarter it had relationships with over 8,000 enterprise dealerships through the car manufacturers or dealer chains.

All of this would indicate that the competition in the online car market is getting to be a bit too much for Autobytel. Major portals like MSN have Carpoint. All of the manufacturers have their own sites. The field has become very crowded.

After strong revenue growth from 2003 to 2004, the curve flattened in 2005 with revenue only rising to $125.3 million from $122.2 million in 2004. In 2005, revenue dropped each quarter compared to the immediately previous quarter, according to Yahoo!Finance.

So, now that Autobytel is shrinking, what can management do? So far the company has not said much about how to reverse the decline.

After earnings were announced the stock fell 15%. It currently trades at $3.65 on a 52-week high/low of $5.99/$3.57. In early 2004, the stock traded around $15.

The online car marketing business is now a pie cut into too many pieces.

ABTL 1-yr chart:

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at [e-mail].

Comments

[BillyJackson]

I like this stock at its current prices. This stock is definately undervalued and is currently a very good buy.

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