Can This Internet Outperformer in 2011 Find Huge Gains in 2012?
It should have been a great year for online multimedia company XO Group (NYS: XOXO) . Unfortunately, even with globally recognized brands like TheKnot.com and WeddingChannel.com, investors just weren't feeling the love in 2011. Let's take a look at what happened and see what we might expect from this company in 2012.
2011: A look back
Over the past 12 months, XO Group bought back approximately 21% of its total shares of common stock, rebranded itself, launched a site in China that partnered with leading social-media player and portal SINA (NAS: SINA) -- a site with 1.3 billion page views, and moved onto the New York Stock Exchange. It also reported year-over-year revenue growth for three quarters, with flat revenue in the first quarter because of the cash-funded repurchase of 10.7% of the company from Macy's (NYS: M) . These are all things that should leave you anticipating huge growth and returns for investors, right?
Well, despite the company's stellar performance in the press, the stock closed almost 15% down from where it started the year. This had less to do with the company's performance, though, than it did with the Internet services industry as a whole:
The chart begins at the end of June, when XO Group changed its name from TheKnot.com and moved to the NYSE, but the full-year chart reflects much of the same: XO Group was the most stable company in the group, outperforming its Internet peer group.
The guys over on our Rule Breakers service dropped the stock in the beginning of the year since it hadn't bounced back from the recession as they'd hoped. Their logic was definitely sound, with the company still down nearly 60% from pre-recession prices at that point, but I think 2012 might be the year investors have been waiting for.
2012: What to expect
When XO Group released its 2010 annual report last April, CEO David Liu stated, "We are beginning to harvest the fruits from two years of platform and infrastructure investments with sales momentum building in our most attractive businesses: national and local online advertising." The consistent growth in revenue reflects that, and after spending $70 million of cash in stock repurchases, it's obvious the company is dedicated to its future.
I expect to see the repurchasing continue (although perhaps at a bit of a slower rate), along with the strategic partnerships. In December, the company announced a new advertising deal with KleinfieldBridal.com, one of the best-recognized brands in the wedding industry. XO Group also partnered with Bloomingdale's registry department for the launch of a new iPad app. The company obviously has a game plan to grow shareholder value and expand its brand -- all things that I expect will make this company a worthwhile investment for the long-term investor even if the wedding industry remains challenged in the near term.
I've already given this company a thumbs-up on my CAPS page. If you'd like to read about another company that I think will do well this year, read about The Motley Fool's Top Stock for 2012.
At the time this article was published Fool contributor Amanda Buchanan owns shares of XO Group, but she holds no other position in any company mentioned. Check outall of her holdings. Motley Fool newsletter serviceshave recommended buying shares of SINA. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.