Fourth Quarter Results Support Relative Value

| About: Inc. (ACOM)

ACOM ( reported fourth quarter earnings and gave guidance after the close today. The report was better than I expected on several fronts and the stock was higher in after hours.

  • Sequential subscriber numbers are estimated to increased by 10.75% in the first quarter of 2011 vs. recent quarter.
  • Churn rate was 3.9% vs. prior September quarter of 4.0%.
  • First quarter guidance was above estimates 86M to 88M vs. analyst guidance of 81M.
  • ACOM expects 2011 total revenue at 372M vs. analyst estimates of 357M.
  • The company expects 2011 full year subscribers to total 1.7M by the end of 2011, an annual increase of 22 %.
  • 2011 revenue growth of 23% and earnings growth of 40% are solid numbers.

On a subscriber model comparison basis, I have ACOM trading at a forward 2012 p/e ratio of 21.29 vs. NFLX at 35.61, so at present prices ACOM offers good relative value. Below is a chart of ACOM which has good support at the 50 day moving average, green line.

Bottom Line: ACOM had a good fourth quarter report and guided revenues higher for the first quarter of 2011 and entire year.

Disclosure: I am long ACOM.