- Demand Media (DMD) became undervalued after the spin-off of the Rightside. Content business generates solid cash flow, while Rightside burned cash. 50/50 split was unreasonable.
- Q3 and Q4 Revenue projected to be $41.7mm and $39.5mm, respectively. EBITDA for Q3 and Q4 projected to be $11.3mm and $10.9mm, respectively. DMD continues to generate strong cashflow.
- EHow viewership has declined 28%, while wikihow has increased 53%. Despite the decline, ~$89mm pf cash estimated post spin-off to diversify the business.
- CEO Moriarty was highly acquisitive at Ticketmaster. I expect him to make acquisitions to build the direct advertising practice.
- DMD trades at 5.77x LQA EBITDA-Capex, while comps trade at 9x-16x. Answers was acquired for 18.6x. I estimate atleast 30% upside to this stock.