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Velti plc (VELT) is a global leader in the marketing of mobile phones, and in providing advertisement solutions to cellular companies. VELT's portfolio includes customers like AT&T (T), Orange, Vodafone (VOD), Telenor, Cellular South and China Mobile (CHL). The stock crossed $10 per share last month, after news came out that it had signed a $27 million contract with an undisclosed major U.S. brand. Velti has since depreciated approximately 15%. We believe this depreciation was not warranted and was a result of investors taking profits after a very good run. The mobile phones marketing industry is still in its initial stages, and has a lot of growth potential. Therefore, we believe that this decrease in price is a very good entry point for investors, and we advise investors to buy VELT.

Windows 8:

The growth in the smartphone industry has totally revolutionized computing and technology. The smartphone/tablet growth, driven by Apple's (AAPL) iPhone and iPad, sent many companies into oblivion. It seems that the market is finally catching up to the iOS company by following in their market leadership. Giants like Microsoft (MSFT), Nokia (NOK), and Research in Motion (RIMM) have totally revamped their products in order to stay relevant in the market. The imminent launch of the Windows 8 would be a big step forward from the previous version of Windows. The Windows 8 will be a competitor to the Android and iOS, for both smartphones and tablets. Microsoft currently has a monopoly in the PC operating systems industry, and we believe that this large user base will be the Windows 8's biggest asset. There are a number of companies that could benefit from Windows ecosystem moving into smartphones and tablets. In a recent interview, Sales and Marketing Vice President Keith Lorizio discussed the huge potential that the Windows 8 would bring to mobile and smartphone advertising. According to the VP, the software giant expects to sell 400 million 'Windows 8' carrying devices by July, and that each Windows Store app would have integrated advertisement. He gave the following statement:

"Every publisher who adds an app into the portfolio of apps we have in the marketplace. We will work with them in order to execute a deal so they can take a share of the revenue for all the ads that we sell on to the network, and the same ads will appear across the network of advertisers, and the most unique thing will be a common look and feel."

This is a huge opportunity for mobile advertising companies such as Velti. There are currently over a billion users of Windows all around the world. The touch based Windows 8 and Windows Phone 8 will significantly drive up disbursement of touch technology, and would benefit advertisers such as VELT, which focus on advertisements for touch interface devices.

Conclusion:

Velti has a history of meeting or exceeding analyst expectations, as can be seen below. The sell-side is estimating average EPS to be around $0.98 for 2013, and high estimates calculate EPS of $1.22. The stock is currently trading at a P/E of 9x, and we believe that it warrants much higher multiples due to the expected growth in mobile advertisement and the launch of the Windows 8. Millennial Media (MM), a company similar to VELT, is trading at an extremely high multiple of 134x. If we use the NASDAQ P/E of 15x, we can establish a price target of $14.7 with average estimates, and $18.3 with high estimates. This is a 50%-100% upside to the current price of $8.8. Therefore, we are bullish on VELT and are giving it a buy recommendation.

 

11-Dec

12-Mar

12-Jun

EPS Est

0.48

-0.02

-0.01

EPS Actual

0.59

-0.02

-0.01

Difference

0.11

0

0

Surprise %

22.90%

0.00%

0.00%

Source: Yahoo Finance

Source: Velti Is At The Epicenter Of The Mobile Ad Boom