By Kris Tuttle
We’ve been writing about our concerns surrounding the viability of the Constant Contact (NASDAQ:CTCT) business from a profit generation and valuation standpoint for some time.
Our most recent entry on February 21, 2008 outlines the key points and provides a link to our full report.
Since that time yet another material concern has emerged on our radar screen. Our report highlights competition but now we see that many site and content management solutions are being extended to include built in email marketing functionality.
Investors should also be reminded as to just how easy it is to move from CTCT to something else. The model starts to break down rapidly if clients don’t stay on the system as long as expected and CTCT management currently expects that to be a long time.
The stock has traded down in what is a tough market with a lock-up that came off last week. It’s down from $24 to $17 but is still above our estimate of $10-12 fair value.
We have nothing against the solution or the company but are only trying to find the truth with respect to fundamentals, expectations and valuation.