Big Data is a rapidly growing sector of the IT industry that offers a lot of opportunities for investors looking for hot tech stocks for their portfolios. "Big data" is a loose term that refers to companies that mine and analyze huge collections of data in order to help businesses better understand their customers and market to them more effectively.
According to the analyst firm Wikibon, the market for Big Data is estimated to reach some $18 billion this year. Based on a compounded growth rate of 61%, this will be worth more than $47 billion by 2017. One of the companies at the forefront of this promising industry is Acxiom Corporation (ACXM), a self-described 'data refinery' whose stock trades within a 52-week range of $12.96 to $22.72 and is presently trading at $21.99.
Despite being a little known company, Acxiom has reportedly assembled the world's biggest database of consumer data, which reportedly contains information on some 500 million active consumers, with 1,500 data points on each individual. Hence, some of the biggest companies in the U.S. have engaged the company's services, ranging from financial institutions such as Wells Fargo (NYSE:WFC) and E*Trade (NASDAQ:ETFC) to automakers like Ford (NYSE:F) and Toyota (NYSE:TM) and even big retailers like Macy's (NYSE:M). Its servers currently process some one trillion data transactions weekly, or a total of some 50 trillion transactions annually.
In its earnings report for FY 2013 and Q4 2013, the company unveiled a number of new services for its clients. This includes AbiliTag, a real time audience recognition service that creates more effective advertising for digital publishers; Audience Propensities, a portfolio of 3,000 propensities for 13 industries designed to help marketers predict consumer behavior; and the Acxiom PrivateCloud, which provides clients with more secure cloud computing. These three applications were based on the company's Acxiom Audience Operating System, a reconceptualization of its core database technologies that it hopes to also open up to third-party developers as well as partners and clients.
As a result of these new initiatives, however, the company entered into a transition period for FY 2013 in which its financials weakened slightly. Revenues for the year fell by 2.7% to $1.099 million from $1.131 million in FY 2012. This was due to the loss of earnings from discontinued operations, namely the sale of Acxiom Information Security Services in February 2012 for $74 million, which amounted to $33.899 in FY 2012. The proceeds of the sale were reflected in the free cash flow to equity in the past year period. Diluted earnings per share attributed to Acxiom customers also fell to $0.75 from $0.96 in the previous fiscal year.
Looking at the results of the different sectors, marketing and data services fell by 0.5% to $767.7 million from $771.7 million in FY 2012, IT infrastructure management declined 5.5% to $275.5 million from $291.5 million and other services shrank 16.7% to $56.2 million from $67.4 million.
In addition, the company also repurchased some 500,000 shares in the fourth quarter worth some $9 million. This brought the total number of shares repurchased since the program was initiated in August 2011 to 10.4 million shares worth $140 million, or some 13% of the total outstanding common stock. The total amount allocated for share repurchases is $200 million.
Outlook for FY 2014
Despite the number of new projects the company introduced in the fourth quarter, it does not expect these to immediately impact the bottom line, and thus, revenues for FY 2014 are expected to remain flat. It also expected a decline in revenues from IT infrastructure management, which would be offset by revenue increases in marketing and data services. In addition, earnings per diluted share that are attributable to Acxiom shareholders were also anticipated to be flat.
Also, during the fourth quarter, the company signed agreements with a number of new clients including Total Wine & More and Foot Locker (NYSE:FL), while expanding its relationship with current client Macy's as well as extending its contracts with two unnamed financial institutions. These agreements could help increase revenues in the coming fiscal year.
In addition, the company has also entered into a partnership with Facebook (FB) to enable the social networking site to create more effectively targeted advertising. For example, the social networking site has indicated that it could effectively identify users whose behavior indicate that they are likely to purchase a car, and let auto dealership target ads to them.
The Bottom Line
While its current earnings report may present a less-than-rosy picture, there is no doubt that the prospects for Acxiom remain bright, particularly in the context of the burgeoning information mining industry. The new products it introduced could help the company grow its revenues as well as increasing its market share. Its share repurchase program indicates that it is optimistic about its future, despite its conservative guidance. The repurchases will also support share prices and prevent them from going down. And if the company's initiatives become successful, share prices could go up so it might be worth it to buy into ACXN now while shares are still relatively low. The stock is not a volatile one since its beta is just 1.82.