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If you own a smartphone, you probably suffer from some sort of obsessive-compulsive disorder by constantly checking your e-mail, looking up stock prices, playing games, or, surfing the Web. One industry that will benefit from this phenomenon is mobile advertising. According to ABI Research, mobile marketing and advertising spending is expected to increase from $1.64 billion in 2007 to $29 billion in 2014. A company that may benefit from this rapid expansion is Velti (VELT).

I tend to gravitate towards undervalued securities, and, my initial exposure to Velti was from an article in Kiplinger's a few months ago. At the time of publication, the stock was trading near a 52 week low of $6.05/share. It shot up to $9/share in a matter of days, once the magazine hit the newsstands. I thought I could catch it on a pullback, but it had a blowout fourth quarter soon after, and the stock rose another 25%. I bought in at $12.50.

Velti had its IPO in January, 2011 at $12/share, and, its 52 week high is $20. As far as price / action is concerned, I believe I got it at a reasonable level. Time will tell if I chased it. So why would I go out and buy a security that's doubled in three short months? First, it has a depressed valuation. Secondly, it's an international organization and hailed as the worldwide technology leader in the embryonic wireless broadband advertising industry.

According to the most recent Velti annual report:

"We are a leading global provider of mobile marketing and advertising technology that enable brands, advertising agencies, mobile operators and media companies to implement highly targeted, interactive and measurable campaigns by communicating with and engaging consumers via their mobile devices."

The company does this via a technology platform dubbed Velti mGage, that feeds advertisements to mobile subscribers. Its client list is impressive and includes: Orange, Vodafone (NASDAQ:VOD), AT&T (NYSE:T), China Mobile (NYSE:CHL), China Unicom, Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), Ford (NYSE:F), Dell (NASDAQ:DELL) and Subway. Velti's platforms provide marketers the ability to reach more than 4.3 billion consumers in 67 countries and their customers have already connected with 1.4 billion consumers. During 2011, its 1,232 customers executed 4,114 campaigns on the mGage platform.

As CEO Alex Moukas said at the last conference call:

"We are at the inflection point with consumers moving to the post-PC world and Velti is very well positioned to benefit from this, offering complete solutions for companies seeking to access the mobile marketing and advertising space."

I agree. His point is illustrated by some projections from market research firm Maravedis:

"Combining 3G and 4G devices, by the end of 2012, there will be a total of 72 million tablets activated worldwide, from 46 million in 2011. In addition, there will be 885 million smartphones activated worldwide, from 650 million in 2011... Finally, by year 2016, our forecast shows that a total of 1.75 billion smartphones will have been activated worldwide."

In the past, one of the big knocks on Velti is the fact the company did most of its business in Europe and the United States (it is based in Dublin, Ireland). However, that's changed in the last few years through partnerships and acquisitions. As an example, last year it established a long-term partnership with Bharti Airtel, the world's 3rd largest telecom operator by subscribers.

Wikipedia demonstrates the company's ability to expand globally:

"In 2008, Velti gained the ability to execute mobile campaigns in the fast-growing Chinese market through the opening of a new office in Beijing and an investment in CASEE, the largest mobile advertising exchange in China (it should be noted that Velti recently purchased the entire company). In India, Velti partnered with HT Media Limited, India's second-largest media group, on a mobile marketing joint venture called HT Mobile Solutions."

Thirty percent of the world's mobile users live in India and China.

With a potentially lucrative market in front of Velti, you can infer it is not the only game in town. In 2010, Google (NASDAQ:GOOG) bought Admob, and, Apple (NASDAQ:AAPL) scooped up Quattro. There are also smaller players in the mix. Millennial Media (NYSE:MM) is an upstart with an IPO scheduled soon. Then there is Augme Technologies (AUGT.OB), the thorn in Velti's side. Augme currently has a patent infringement suit against Velti in the works. This is a common occurrence with technology companies, but something you should be aware of.

For a young growth company, I think Velti's valuation is still a bargain, despite the run up of late. For fiscal 2012, the average analyst estimate is $.74/share which gives it a P/E Ratio of 17. Take into consideration that it is projected to grow earnings 48% for that same year, and you've got a deal. Going forward to 2013, the earnings estimates are for $1.01/share. Its projected compound annual growth rate for the next five years is 37%. On the sales side, the company is projected to take in $290 million this year-- an increase of 53% over 2011. For 2013, expectations revenues are $390 million, a 35% increase year over year.

Projected estimates could prove to be conservative this year, with catalysts like the November elections in the United States, and the Summer Olympics in London. I know I like this stock. However, these "can't miss" securities can sometimes go rogue, and you may get shafted in the near term-- especially since the market has moved so far in so short a time. I'm willing to take the chance that it will push higher from here. If the market corrects, and Velti along with it, I would add to my position.

Source: Velti: 'Mad Men' In The New Millennium