Omniture: Pure 'On Demand' Provider Reports Q4 Earnings Thursday

For Credit Suisse’s Jason Maynard, it was triple-play Tuesday. In addition to his new coverage on Adobe and WebEx, Maynard today started coverage of Omniture (OMTR), with an Outperform rating and $21 price target - and this may be the stock where he gets the biggest bang.

Omniture, he explains in a research note, is a leader in the market for On Demand web analytics, which “help organizations optimize their online marketing, e-commerce, and customer service-related activities.” He describes the company as a “pure On Demand provider, enabling customers to benefit from faster time to innovation, highly scalable technology, and a superior service offering.”

Maynard thinks the company can maintain its 50% growth rate over the next few years “as it gains share and expands its presence in the international and mid-size company markets.” For software investors, he adds, “Omniture is a derivative play on the fast growing online advertising and e-commerce market segments.”

Omniture reports fourth quarter earnings on Thursday; Maynard sees revenue of $22.9 million and non-GAAP EPS of a penny a share.

In pre-market trading, Omniture shares were up 85 cents, or 5.2%, at $17.15.

OMTR 6-mo. chart

Comments

[CrossProfit]

Below are the 2006 trailing earnings and 2007 forward figures as provided by Omniture. Note that the GAAP loss projected for 2007 by the company is $0.13 and non-Gaap, meaning excluding stock option compensation expense is $0.09 profit.

"Full Year FY 2007: Revenue for the company’s full year 2007 is expected to be in the range of $128 million to $130 million. GAAP net loss is expected to be in the range of $0.15 to $0.13 per diluted share. Excluding the effect of stock-based compensation expense, the amortization of certain intangible assets, imputed interest expense and non-recurring acquisition related expenses, non-GAAP net income for the year is expected to be in the range of $0.07 to $0.09 per diluted share. Omniture expects to record positive adjusted EBITDA in the range of $16 million to $18 million."

From 2/20/2007 through 3/08/2007, insiders have sold 1.1M shares between $14.96 and $17.04. This is a phenomenal amount of concentrated insider selling that has been noticed by the street. In addition, out of the 12 analysts covering OMTR all 12 have reduced 2007 EPS estimates by at least 50% over the past 3 months yet the stock has continued to defy gravity.

We doubt if OMTR will be capable of producing a buck per share earnings in the next 5 years even if it is able to sustain a 50% revenue growth rate for the entire period. Essentially Google (GOOG) has already begun to develop competitive software. GOOG can and will give OMTR a run for its money. GOOG is not interested in purchasing OMTR as it has the entire in house tech/patents and does not wish to pay patent royalties or engage in unnecessary litigation, which is the case with OMTR tech.

Disclosure: Personal opinion of CrossProfit analyst.
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