Update: QuinStreet Earnings

| About: QuinStreet, Inc. (QNST)

Summary

The company managed to beat fiscal 4Q consensus on both the top and bottom lines.

We realize our bearish thesis might have played out and it might be time to cover any short positions.

We didn’t expect the strength in the recent quarter and note the valuation is in-line with its prospects.

QuinStreet (NASDAQ:QNST) managed to post fiscal 4Q earnings of $0.01 a share (beating consensus of a $0.06 loss and revenues of $67.6 million marginally missed consensus. Shares are down 5% over the last week. 4Q EPS was just above the company's own expectations and EBITDA was only 3% of revenue.

However, the company continues to reinvest in the business, hence the low EBITDA margin and it has exposure to a couple of fast growing industries -- autos and financials -- its two fastest growing segments last quarter. Since we first covered the stock back in November of last year, shares are down 46%. As we noted:

One of the biggest qualms for QuinStreet's business model is its business practices. The company's marketing practices are less than kosher...The Better Business Bureau also notes that back in 2012, 20 states alleged that QuinStreet violated the states' consumer protection laws in the course of operating websites that generate leads primarily for the for-profit education industry.

Shares have broken below our $5.50 price target. We realize that trading at 11.6x EV/EBITDA, shares are now worthy of a hold. Shares are trading at a 12.8x forward earnings, which is below our justified multiple of 15x.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.