Webxu Undervalued After Earnings Release

Webxu (WBXU)

Webxu Inc. (OTCBB: WBXU), is a performance media company that develops, owns and operates a network of branded consumer websites in categories marked by high consumer engagement and strong advertising spending. Operating in the digital media industry with companies like IAC/InterActive Corp (NASDAQ: IACI), Webxu appears to be significantly undervalued after unveiling its 2011 earnings release.

Webxu Ramps Up in 2011, Looks Ahead to 2012

Webxu announced very strong 2011 financial results a week ago, demonstrating that is has successfully ramped up its business. On a pro forma basis, net revenues for the fourth quarter of 2011 came in at approximately $4.7 million, which was more than double the $2.2 million seen during the third quarter, while its gross margins jumped from 32% to 34% over the same period.

Matt Hill, Chairman and CEO of Webxu, commented in their recent press release, “We are extremely pleased at the substantial progress we have made in the very short time since Webxu incorporated in 2010. In 2011, we took the company public, acquired and successfully integrated two businesses that provide a strong opportunity for organic growth, and delivered sequential quarterly growth. As we plan to continue our pace in 2012, we remain focused on successfully executing our strategic plan. Along with our organic growth strategy, we recently signed a LOI with a current strategic and synergistic acquisition that we expect to bring significant top and bottom line growth in 2012. We believe that we are well positioned to become a significant player in the digital media space.”

Webxu May be Significantly Undervalued

Webxu could be significantly undervalued based on both its growth and potential to generate free cash flow. With gross margins of around 31% all indications point to the company’s growth trends to continue. The chart below illustrates how we see the company trending for 2012.

Period Revenue
(Growth Rate)
Gross Profit
(Gross Margin)
Net Income
P/E Multiple Price per Share
Q1 2012 $5.3M (0.4%) $1.56M (30%)
Q2 2012 $7.7M (15.9%) $2.20M (31%) $0.16 20x $3.23
Q3 2012 $8.9M (16.5%) $2.80M (31%) $0.23 20x $4.65
Q4 2012 $10.1M (58.8%) $3.10M (31%) $0.31 20x $6.11

* Assumes sharply higher $4M in quarterly operating expenses and 21.1M shares outstanding.

In the model above, we assume that the company will grow modestly year over year, on a pro forma basis, before leveling out. Meanwhile, we assume that operating margins decline and price-earnings multiples even out at around 20x, which is a conservative assumption given that industry peer IAC/InterActiveCorp (Nasdaq: IACI) is at 16.03x and the industry average is at 25.03x.

A Great Investment Opportunity

Even with these conservative figures, Webxu appears to be significantly undervalued in the growing Internet sector at its market price per share today of $1.50. Successful execution of its business strategy over the next year could pave the way for a price per share close to between $3.23 and $6.11 per share by the end of 2012. This valuation could move even higher if it trades at a comparable rate to its peers.

WebXU (WBXU) Stock Quote and News:

Disclaimer: Neither nor its officers, directors, partners, employees or anyone involved in the publication of the website or newsletters (“us” or “we”) is a registered investment adviser or licensed broker-dealer in any jurisdiction whatsoever. Further, we are not qualified to provide any investment advice and we make no recommendation to purchase or sell any securities. The prior article is published as information only for our readers. is a third party publisher of news and research. Our site does not make recommendations, but offers information portals to research news, articles, stock lists and recent research. Nothing on our site should be construed as an offer or solicitation to buy or sell products or securities. This site is sometimes compensated by featured companies, news submissions and online advertising. Viper Enterprises, LLC (parent company of OTC Showcase) has been compensated four thousand dollars by an unaffiliated third party, Accelerize Financial, for its efforts in presenting the WBXU profile on its website and distributing it to its database of subscribers as well as other services. Please read and fully understand our entire disclaimer at


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