Independent mobile ad network
Millennial Media, Inc. (NYSE:MM) has been public the longest at just over a year, and the weak returns on this stock have been a primary reason for the negativity on the two that followed in this sector recently. This stock peaked around $28 on the first trading day and didn’t see a bottom until around $6 in April. For the first 12 months, the stock lost nearly 80% of the value from those initial trades.
Similar to Tremor Video Inc (NYSE:TRMR), the company continues to forecast growth in excess of 50%, but it hasn’t stopped the stocks from collapsing. A big issue with specifically Millennial Media, Inc. (NYSE:MM) has been some of the concern around monetizing mobile, though as those have faded it hasn’t helped the stock.
At a market cap of only $750 million, analysts forecast the stock to trade at less than 2 times 2014 revenue, which will grow around 46%. The disconnect between the current valuation and the growth rate is one of the largest in the market. Typically a stock with those growth rates and the projection of being profitable would send the stock soaring towards multiples of at least 4 or 5 times projected revenues.
Video ad network
Tremor Video Inc (NYSE:TRMR) is the most recent of the advertising technology IPOs and had one of the most disappointing pricings in a very weak week. The company originally filed for a range of $11 to $13 and eventually settled for pricing at $10. The stock then opened and closed the first trading day around $8 before sinking below $7 by the fourth trading day.
The company focuses on the technology-driven video advertising segment where its in-stream video grew revenue 53% year-over-year in Q1 from last year. At a market value of around $400 million, the stock offers an interesting value with a revenue base of over $100 million and surging.
Bottom line
This group of stocks provides one of the more compelling sectors to follow as technology and the complexities of social, video, and mobile make advertising ever more complex to correctly target and track campaigns. Considering the quarterly reporting pains that a lot of new IPOs encounter, Millennial Media, Inc. (NYSE:MM) offers the best valuation and stable position in the group. Investors might want to buy that stock and follow the results of Marin Software Inc (NYSE:MRIN) and Tremor Video Inc (NYSE:TRMR) to see if the actual numbers back up the expectations. If that is the case, the market is overlooking two cheap stocks.
Mark Holder and Stone Fox Capital Advisors, LLC own shares of Millennial Media. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article 3 Advertising Tech Stocks to Load up On originally appeared on Fool.com is written by Mark Holder.
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