Web Syndication Deals, Growing E-Commerce Will Help Dreams Shares Jump

| About: Dreams, Inc (DRJ)
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Shares of Dreams Incorporated (NYSEMKT:DRJ) traded up six percent in after-hours trading. The shares hit their highest level since 2007 by reaching $3.04. The move was due to reported fourth quarter earnings. The company reported earnings of $0.14 and Dreams only came in with $0.12 in earnings. Investors were however impressed with the company's guidance and growth in e-commerce and web syndication.

For the fourth quarter, Dreams reported these highlights:

  • Revenue of $75.2 million, up 24%
  • E-Commerce revenue of $64.6 million, up 27%
  • Web Syndication revenue of $26.8 million, up 24%
  • Net income of $5.2 million, up 26%
  • Earnings per share of $0.12
  • Number of web syndication partners increased to 77

Full year results were also announced and had these highlights:

  • Revenue of $141.7 million, up 27%
  • E-Commerce revenue of $113.0 million, up 33%
  • Web syndication revenue of $44.0 million, up 29%
  • Net income of $1.2 million
  • Earnings per share of $0.03

Dreams Incorporated's web syndication portfolio continues to grow. The company launched 19 new websites for various sports teams and companies during fiscal 2011. During the conference call, Dreams announced a new partnership with Modell's Sporting Goods. Recent additions to the web syndication portfolio include:

  • Kansas City Chiefs
  • Portland Trail Blazers
  • Hibbett Sports (NASDAQ:HIBB) - This is a huge deal for Dreams as Hibbett operates 832 stores across the country and will now rely on Dreams to expand the company's web presence.

For fiscal 2012, Dreams expects revenue of $175 million, or an increase of 24%. E-commerce, which is the company's strongest source of revenue, is expected to grow 30% to $147 million. The big number that stood out to anyone on the call was forecasted EBITDA numbers of $12-$13 million, which signals an increase of 116%-134%.

I wrote a recent article about Dreams along with Nike (NYSE:NKE) being the biggest winners in the Peyton Manning free agency sweepstakes. Peyton Manning was traded to the Denver Broncos and new fans will welcome him to Denver by buying a new jersey. Nike takes over the exclusive rights to the National Football League jerseys. Both Peyton Manning and Tim Tebow are featured on Fans Edge's home page and currently have 27 new Manning items as a Bronco, and 12 Tebow items as a Jet. The Nike deal offers Dreams a great opportunity to sell more NFL jerseys than any other year.

Last December, I recommended shares of Dreams at $2.16 in an article entitled Dreams Incorporated is a Double in 12 Months at Today's Share Price. That article is a great starting point in research as it points out the brands owned by Dreams and the contracts they had with several e-commerce websites.

I have recommended buying shares of Dreams Inc. in several articles and continue to hold a $4 price target by the end of calendar 2012. With shares at $3.04, that leaves nearly 25% upside. Dreams is a truly remarkable small cap company with a great growing online business.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DRJ over the next 72 hours.