Webxu Inc. (OTCBB: WBXU) is a media company that owns and operates a network of consumer-oriented web properties and businesses in the online customer acquisition and e-commerce fields. With Internet Brands now privately held and several IPOs hitting the market,we believe the company represents an attractive play on Internet alongside IAC Interactive Corp (NASDAQ: IACI) and Demand Media Inc. (NYSE: DMD).
Internet Brands Buyout Demonstrates Value
Internet Brands was purchased by Hellman & Friedman for about $640 million in a leveraged buyout back in September of 2010. With 2010 revenues estimated at $113.5 million and net income of $13.7 million, based on Q2 and Q3 2010 results, the company was a very attractive target for the private equity marketplace.
The buyout occurred at a significant premium due to high interest on the part of private equity firms in profitable Internet companies. In fact, the same firm has invested in companies ranging from DoubleClick (later acquired by Google) to Getty Images. We believe that Webxu strongly resembles this business, which makes it a stock definitely worth watching.
Internet IPOs Further Highlight Valuations
The recent wave of Internet IPOs has further validated the sector's potential. These companies have included Angie's List Inc. (NASDAQ: ANGI), Groupon Inc. (NASDAQ: GRPN), LinkedIn Corp (NASDAQ: LNKD), Pandora Media Inc. (NASDAQ: P) and Zynga Inc. (NASDAQ: ZNGA) among others and they have performed fairly well given the current economic climate.
In fact, all of these IPOs were able to price highly during their initial public offerings, despite some recent retracements as early investors book profits. And while some media pundits may be criticizing the group for a lack of profits, they fail to realize that it's more profitable for the companies to reinvest in their own growth than realize an immediate net income.
Webxu Could be Next after Filling the Void
Webxu is focused on providing high ROI's for their advertiser clients via their owned and operated network of web properties. By excelling at data management, testing and optimization, the company is able to generate significant revenues from their properties. And this business model is very similar to that of Internet Brands and other successful industry competitors.
The company has been trading publicly since October of 2011 and represents a relatively new player in the market. On a pro forma basis following its acquisition of Lot6 Media in November, the company generated $19.6 million in revenue, $2.5 million in EBITDA, and a net income of $0.16 per share, for the 9-month period ending September 30, 2011, according to its latest 10-Q filing.
According to their most recent 8-K filing, Webxu announced their intention to purchase a data management and monetization company whose unaudited preliminary financial statements reflect 2011 performance of $28.9 million in revenue with $5.6 million in EBITDA.
A Great Investment OpportunityWe believe that Webxu represents an attractive investment opportunity for two reasons. First, it strongly resembles Internet Brands, which was sold to a private equity firm in 2010 during a tough market. And second, it has yet to realize any of the upside seen by many recent internet IPOs, which means that it could be overdue for a higher valuation.
Disclosure: The subject security is a client of Accelerize Financial. For full financial disclosures for all Accelerize Financial clients, please visitsecfilings.com/Disclaimer.aspx.