Is TheStreet.com In Play?

Now that News Corp.’s (NWS) acquisition of Dow Jones (DJ) is a fait accompli, I wonder what fallouts, if any, we will see amongst competitors.

Thomson (TOC) and Pearson (PSO) will be under the spotlight to react, but what about GE (GE) whose CNBC franchise will be well within Rupert Murdoch’s cross-hairs as he unleashes Fox Business Channel.

With digital opportunities being so important, I wonder if GE’s NBC unit will try to bolster its own online strength. If it does, how long before it makes a move for TheStreet.com (TSCM)?

TheStreet.com is one of those companies, like CNET (CNET) and others, that can be a buyer as much as it can be a seller. TheStreet.com’s market cap of $300M is nothing to sneeze at, but with yearly revenues of $56M, no debt and $50M in cash, it’s a solid asset with a very strong brand name that could over time make a difference in the business news segment.

TheStreet.com has historically been too reliant on subscriptions, a revenue stream that in today’s advertising-obsessed environment might hurt its chances to fetch a hefty premium in an M&A. Of course, with Rupert Murdoch’s mammoth ambition and track record to make moves and act on them very fast, it’s true that TheStreet.com might not be enough for CNBC to contain the oncoming train otherwise known as the Fox Business Channel.

Then again, TheStreet.com’s founder Jim Cramer’s show is on CNBC, so that creates an interesting predicament for sure…

And speaking of NBC, CEO Jeff Zucker is quick to state that CNBC need not worry too much (ie. an acquisition is not necessary), but if you are TheStreet.com, then you can rest assured that, maybe, just maybe, Rupert Murdoch might be eyeing your assets as it bolsters Wall Street Journal’s online ambitions.

Seeing how strong the WSJ and TheStreet.com are in subscriptions, I don’t think that deal makes the most sense (because Murdoch should in theory be looking at bolstering advertising sales, not doubling up on subscriptions…) but the fact remains, as two media giants GE/NBC and News Corp. prepare to clash in the lucrative business segment, TheStreet.com is one asset that is definitely in play.

A little tidbit worth noting: TheStreet.com this year hired former iVillage senior executive Steve Elkes. You might recall, iVillage was acquired by NBC for $600M in March 2006. We’re not saying that this means another sale to GE is a slam dunk for Elkes, we just find that interesting. Mr. Elkes had no comment when we asked him for his thoughts on that theory… but I would presume that his first mandate when he came in to TheStreet.com as Chief Revenue Officer and Head of M&A was to scoop up assets for TheStreet.com. So far, he’s pulled the trigger on Stockpickr as well as Promotions.com… we’ll see if his third deal will in fact be the charm.

Comments

[Ralph F]

TSCM is to dependent on Jim Cramer; that's what stopped anyone buying it last time it was on the block. So TSCM has to be an acquirer, because it desparately needs to diversify from Cramer-centric content.

[Lisa]

Think Equity initiated with a buy on Jan 3rd:

We are initiating coverage of TheStreet.com (TSCM) with a Buy rating and $18 price target. We believe TheStreet is one of the best-managed small cap media businesses on the Internet today, with a leadership position in the online financial services category and solid growth prospects over the next few years. However, with the stock up approximately 75% over the past 12 months (vs. NASDAQ up 7%), we advise investors to remain sensitive to valuation. Our $18 target is derived using an average of 16x our 2008 EBITDA forecast of $26M and 35x our fully-taxed 2008 FCF/share estimate of $0.56.

TheStreet Remains One of the Fastest-Growing Sites in the Financial Services Category. Our research suggests that TheStreet is growing faster than any other major financial news and information site on the Internet. Audience gains are being driven by strong word of mouth, other viral marketing initiatives, third-party distribution agreements, and better SEM/SEO execution. According to TheStreet's internal logs, the company grew its user base by 54% during third quarter 2007, representing an acceleration from the 23% growth in 2Q07 and 11% growth in 1Q07. User engagement is on the rise as well, with page views up 64% annually in the third quarter, representing an acceleration from the 42% annual growth in page views during 2Q07 and 22% growth in 1Q07. While TheStreet's internal figures include the benefit of users acquired through Promotions.com during 3Q07, third-party audience metric firms show similar growth rates for TheStreet.com, excluding acquired properties. According to comScore, TheStreet.com grew its users by 59% Y/Y in October 2007. That compares with 8% Y/Y growth in the online financial content category, suggesting that TheStreet is gaining market share at the expense of competitors like Yahoo! Finance, MSN Money, MarketWatch, and CNN Money.

[Long-ShortGuy]

December traffic doesn't look so good:

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