Could Bazaarvoice Be An Easy Double?

| About: Bazaarvoice (BV)


Capitalizing on the FeedMagnet purchase is genius.

Social media is the new word-of-mouth marketing.

The sale of PowerReviews means cash.

Capitalizing On The FeedMagnet Purchase

Bazaarvoice's (NASDAQ:BV) recent purchase of FeedMagnet will propel revenues through a revolutionary "Branded Social Hub." This cutting edge marketing technology was developed by FeedMagnet to sift all social media sites and harvest a consumer's post about a particular merchant, product or service. Once gathered, these posts are organized into a Branded Social Hub for the respective company. These social media posts undergo a proprietary 4-step process developed by FeedMagnet and are displayed on a merchant's Branded Social Hub. The FeedMagnet process:

  1. Gather: Search all social media consumer posts and collect them for the merchant.
  2. Filter: Each post will undergo algorithmic filtering for relevance and maximum impact.
  3. Moderate: Human moderation ensures that only the most compelling content is displayed.
  4. Engage: A powerful social media engagement strategy and new customer procurement.

FeedMagnet's Branded Social Hub solutions will add value to any company's bottom line. FeedMagnet is already working with some of the world's top brands says Jason Ford, Founder and President of FeedMagnet:

I'm thrilled to announce today that FeedMagnet is joining the Bazaarvoice team. We can't imagine a better partner for the future. When we started FeedMagnet in 2009, we believed that human connection should be at the heart of the relationships between people and businesses. Since then, we've had the privilege of working with some of the world's top brands, infusing their online engagement and commerce experiences with human connection.

Social Media's New Word-Of-Mouth Marketing Is Exploding

Social media is the new e-commerce word-of-mouth marketing (WOMM). Posters are so hyped on their own personal choices, purchases, likes, and recommendations that they post passionate comments about a merchant's products and services on their social media sites. It's a kind of "look what I found," or "look what I bought," and "check out this fantastic deal." They are unsolicited ambassadors of goodwill and their word-of-mouth is the most powerful form of advertising.

Before FeedMagnet when posters shared a merchant's link on a social media site (hundreds of thousands of times a day) they remained scattered across multiple sites and often scrolled off the social site's main page, not being seen by others and forever lost. The main impact of the word-of-mouth post is useless if no one sees it, right? Now there's a solution -- FeedMagnet. A company's post are gathered, processed and displayed on a Merchant's Branded Social Hub.

Normally, posters click the "like or share button" on a product, service or merchant's site and link off to their favorite social media site with an irresistible "I love this, just bought one" post. With FeedMagnet, merchants can pull social content directly to their branded website. This branded destination gathers and presents social content that results in superior customer conversion and brand loyalty. Potential customers will now read and view a consumer's post with photographically rich content and passionate recommendations that were originally posted for family and friends to view. It just doesn't get any better than this -- pure genius!

With Bazaarvoice's client base comprised of the top brands in the country, this looks like a potential goldmine. You can check out the power of Bazaarvoice's new FeedMagnet here…

The Sale of PowerReviews Means $$$$

In 2012, Bazaarvoice purchased PowerReviews for approximately $31 million in cash, 6.4 million in common stock and 1.6 million in options, valuing the company around $168 million. Today, using Bazaarvoice's current share price of $7, the 6.4 million shares are valued around $44.8 million and the 1.6 million in options are valued around $11.2 million. Factor in the $31 million cash and you arrive at about $87 million.

The options and common stock are of no concern at this point, regardless of who holds them. Their value is locked into the current share price of $7. This gives Bazaarvoice a huge amount of leverage in the selling price of PowerReviews.

Bazaarvoice recently reported that Viewpoint LLC has signed an agreement (LOI) to buy PowerReviews. The letter of intent will no doubt give Viewpoint a look under the hood before finalizing the deal. While the sale price is undisclosed, we can assume that the $168 million Bazaarvoice initially valued the company at 2 years ago will come into play. On the other hand, Viewpoint will approach the deal from the current value of today's asset value of $87 million, arguing that Bazaar voice only paid $31 million in cash for PowerReviews. My estimate is somewhere between $87 to $120 million, depending on the actual assets released, and subject to the court's approval.

Shares of Bazaarvoice could appreciate $2 to $4 in just a few days if the sale price comes in at the high end. We have already seen the share price jump to $7.79 before settling back to $7.10 based on a press release of a pending deal.

Institutional ownership remains high with 93 institutions holding 75% of the common stock.

Not long ago I became more convinced that Bazaarvoice was undervalued at the $7 range and shared my prospective with a Wall Street investor involved in the banking industry. I asked him to do a little research and share his thoughts on the value of Bazaarvoice. The next day he sent me this email:

I'm in! Thanks for the guaranteed winner. Have a good weekend.

A few days later I gave him a call looking for an explanation. He explained that after researching Bazaarvoice he too believed the company was undervalued and only fear was holding the share price down. I agreed.


Zacks Investments has Bazaarvoice as a Buy.

Other analysts see the low target at $8 and the high at $11 with a $9.50 consensus. At $7 Bazaarvoice looks like a steal. Personally, I see an easy double to $14 over the next 12-24 months.

Disclosure: I am long BV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.