Software Provider Omniture is Worth a Hard Look

Omniture (OMTR) is a Web Analytics software provider which enables businesses to monitor and analyze their online business, including static pages and transactional sites. The company competes head to head with Web Trends - an older, more established software provider, but boasts a better looking product than them.

Omniture has made a big run from $15 to $17 the last couple of weeks - and this in addition to doubling from its IPO price of $7 and change just last summer. In fact, it was and perhaps still is one of the least talked about IPO's of last year - remember Under Armour (UA), Vonage (VG), Nymex (NMX), Mastercard (MA) etc.?

The company released earnings yesterday and reported a record quarter with quarterly revenue growth of 71% above last year, along with an annual revenue growth of 86% in 2006 vs. the previous year. They lost $0.02 per share in Q4 of 2006 compared to $0.52 in Q4 of 2005. More importantly, they are looking to increase revenues by 60% in 2007, along with EPS growth of over 40%.

During this last quarter of 2006, Omniture added over 250 new customers, bringing the total to approximately 1,800 and captured data from over 420 billion transactions. Their customers include the likes of Ameritrade (AMTD), Anheuser Busch (BUD), Apple (AAPL), Boston Scientific (BSX), Countrywide (CFC), eBay (EBAY), Ford (F), H-P (HPQ), Goodyear (GT) and Microsoft (MSFT) to name a few.

The company's vast showcase of customers illustrates the importance of this business intelligence [BI] tool. Most of their companies have high impact online businesses if not an entirely online business model. I have liked Microstrategy (MSTR) - another BI tool since the stock traded in the teens back in early 2003 and the stock has produced gains of 600% since then. I believe OMTR, is capable of generating at least 200% over the next couple of years. Here is why:

* Companies are constantly looking for ways to generate leads and revenue online. This software enables them to track their consumer movements click by click, along with any and all metrics one could think of.
* The software is easy to use and intuitive - executives actually use this tool.
* Implementation times are generally quicker than other business applications.
* Companies are sitting on a lot of cash that they are using to invest in such technologies.

I recommend buying this stock at $16 or lower.

Full Disclosure: I do not own OMTR but my position might change anytime without notice.

Comments

[CrossProfit]

Not sure about this one. In the short term the stock has had a nice bounce however money stream has now dried up.

OMTR is a $10-$12 stock that has gotten way ahead of itself. Q4 2006 was more or less in line (-0.02) with estimates (-0.01). With no profits and 0.25 forward EPS for 2007, when the hype stops this one will come down heavy and fast. There are no new fundamentals that were not known at the time of the IPO.

It is very rare that an IPO is severely under priced by a 100%. More often than not, 100% post IPO gains are given back very quickly. MasterCard is the 2006 (50%) exception. I would rather miss the boat than take a 40% beating.

Disclosure: Opinion of CrossProfit analyst and may not be the consensus at CrossProfit.com
www.crossprofit.com

[CrossProfit]

Below is the correct version of 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.

Disclosure: Personal opinion of CrossProfit analyst.
www.crossprofit.com