Why Bankrate Shares Blasted Off
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Bankrate soared by nearly 19% today after the company upped its forward guidance for the second half of the year.
So what: Bankrate's earnings report came in last night, and it wasn't much to write home about -- revenue of $105.5 million missed the $106 million consensus, and earnings of $0.10 per share likewise fell short of Wall Street's $0.11 EPS target. However, Bankrate now projects revenue growth of 10% to 20% for the second half, which would bring 2013's revenue to approximately $457.2 million at the middle of the range, which now bests the consensus of $454.8 million. That would be even with 2012's result, which also came in at $457.2 million.
Bankrate also expects margin expansion in the second half, and has guided EBITDA margins over the 25% range for the rest of the year. Part of that improvement is likely to come from the company paying off $195 million in high-interest (11.75%) debt with a new debt raise under more favorable conditions.
Now what: After the pop, Bankrate is now rather close to several analyst price targets. Needham's price target is set ay $20, a mere 7% increase over the current price, and Merrill Lynch's $22 price target is 17% higher. With a P/E approaching triple digits, Bankrate is far from cheap. Simply returning to even with last year's result seems inadequate in terms of justifying this big bounce.
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