Seeking Alpha
IPOdesktop, IPOpremium (431 clicks)
Value, IPOs, long only
Profile| Send Message| ()  

Based on fundamental financial analysis Millennial's (MM) IPO is fully priced at $25, which is a 150% increase of the price range mid-point earlier this week.

MM's original price point mid-range was $10. It priced at $13 and today trades around $25, for a 150% increase from the original price range mid-point. See table below:

Mrkt

Price /

Price /

Price /

Price increase

Millennial Media

Cap
($mm)

Sales

Earnings

BookValue

over original mid-point

original mid-point, $10

$750

5.4

-18750

6.6

ipo price, $13

$975

7.0

-24375

8.6

30%

1st day price, $25

$1,875

13.4

-46875

16.4

150%


REVENUE GROWTH

Yes, MM has great top line revenue growth of 110% for 2011 compared to 2010, with a 37% increase in top line revenue for the December 2011 quarter versus the September quarter.

MARKET SHARE

Millennial Media has a 16.7% market share, according to IDC. It's second only to Google (GOOG) which has a 23.8% share, while Apple (AAPL) is third with a 15.1% share.

LIMITED ABILITY TO SET PRICES

Apple and Google are probably not running their mobile advertising businesses strictly as profit-making units, which puts MM at a disadvantage. In other words, AAPL and GOOG may cut mobile advertising rates in order to give their own ad space offerings a competitive advantage. MM doesn't appear to have pricing power in the market.

CONSISTENT QUARTERLY EXPENSE PERCENTAGES

MM's gross profit margin is only 39% and the expense ratios are fairly consistent. And for the past six quarters MM is essentially breakeven showing a slight loss. Therefore, it's hard to see how the income statement can be leveraged to show significant profit, even with exploding revenue increases.

FINANCIALS

Ratios based on the original price range mid-point:

Millennial Media

MM, C, 7.5

Post IPO shares: 75mm

Mobile adv platform

Dec 31 fiscal

Baltimore, MD

2010

2010

2011

IPO Mkt

Revenues ($mm)

$16

$48

$104

Cap

Gross profit % of revenue

29%

34%

39%

$0

Pre-tax loss

-$8

-$7

-$1

@$10

Pre-tax loss % of revenue

-48%

-15%

-1%

Adj EBIDTA

-$7

-$6

$2

Adj EBIDTA % of revenue

-44%

-13%

2%

Quarterly results

Sept, '10

Dec, '10

March, '11

June '11

Sept '11

Dec'11

Revenues ($mm)

$11

$19

$22

$22

$25

$35

Revenue increase over prior qtr

73%

13%

4%

13%

37%

Gross profit % of revenue

36%

35%

37%

39%

39%

39%

Sales & Mkt % of rev

18%

13%

16%

16%

13%

12%

Tech & Dev % of rev

5%

3%

3%

5%

6%

5%

General & Admin % of rev

25%

27%

18%

21%

21%

21%

Pre-tax loss

-$1.3

-$1.7

$0.0

-$0.6

-$0.2

-$0.1

Pre-tax loss % of revenue

-12%

-9%

0%

-3%

-1%

0%

Source: Millennial Media Fully Priced After A 150% Increase