Omniture, Overweight, $9.85 We are maintaining our Overweight rating on Omniture, as we continue to expect web analytics to become a core necessity for Internet enterprises, and we belie
Trang 1Table 143: MercadoLibre Annual Cash Flow Statement
$ in millions
Cash flows from operations
Cumulative effect of change in accounting - - - -
Funds receivable from customers (15.5) (7.3) (14.6) (18.2)
Cash flows from investing activities
Proceeds from sale of investments 29.8 90.6
Payment for purchases, net of cash required - (39.2)
Purchase of intangible assets (0.0) (0.1)
Purchase of property and equipment (3.1) (5.4) (6.7) (7.9)
Cash flows from financing activities
Cash and equivalents, beginning of period 7.1 15.7 12.5 41.2
Cash and equivalents, end of period 15.7 12.5 41.2 80.2
Source: Company reports and J.P Morgan estimates
Trang 2Omniture, Overweight, ($9.85)
We are maintaining our Overweight rating on Omniture, as we continue to expect web analytics to become a core necessity for Internet enterprises, and we believe Omniture’s standing as the clear leader in the space positions the company well to benefit from this industry growth Our 12-month price target for OMTR is $17
• Cross-selling larger product portfolio is a key growth driver Omniture
continues to enhance and enlarge its product offerings; most recently the company added online merchandizing technology and personnel acquired from Mercado We think the ability to use a single sales force (augmented on occasion
by more specialized staff) gives Omniture an opportunity to grow its ticket size from existing customers, and improves customer lock-in by creating additional ways to make a more compelling product
• F’09 revenue growth likely to see impact from soft IT spending We are
modeling only a 33% rise in non-GAAP revenue growth in F’09 At the same time, our industry contacts suggest most companies that use a paid analytics product do not see it as discretionary; thus, we don’t expect churn to rise Further,
we think a greater focus on costs at search companies and other competitors could work in Omniture’s favor Omniture has the scale to continue investing in product and a paid customer base for such investments to yield positive returns
• Profitability growth likely to be muted until revenue growth fades Omniture
faces significant up-front costs and CapEx as each new customer or product is added, in order to build out network and server capacity to handle traffic from the new customer; new contracts can take two-three quarters to start paying for themselves As long as Omniture’s sales pipeline remains healthy, the client onboarding costs are likely to constrain margins growth In the longer run,
however, we continue to believe 25% EBITDA margins are achievable
• 2009 drivers In our view, the following factors will drive shares in 2009: (1) the
IT spending environment, (2) impact from changes in the competitive environment, including both paid competitors and free offerings, (3) international growth and (4) the ability to boost ASP through cross-selling
• Maintaining our 4Q’08, F’08 estimates We are maintaining our estimates for
non-GAAP revenue, EBITDA and EPS for 4Q’08 of $85.0M Our current and newly introduced 2010 estimates are in the table below:
Table 144: Omniture Financial Snapshot
$ in millions, except per share data
J.P Morgan
EPS $ 0.12 $ 0.42 $ 0.61 $ 0.77 116% 44% 26%
Consensus
EPS $ 0.13 $ 0.43 $ 0.64 $ 0.86 120% 48% 36%
Source: J.P Morgan estimates, Company data, and Bloomberg
Trang 3Our Estimates and Outlook for 2009
We believe F’09 is likely to turn on two competing forces: on the one hand, we expect both IT and marketing spend to be soft Y/Y On the other hand, we see analytics as increasingly becoming a must-have tool for enterprise website operators
As such, we are forecasting for Omniture to continue adding customers and tickets, but for revenue growth to slow somewhat
We are maintaining our F’09 revenue estimate of $410M, representing 33% Y/Y growth; our EBITDA estimate of $77M, up 31% Y/Y, and slightly pushing up our pro forma EPS estimate to $0.61, from $0.59
Our Estimates and Outlook for 2010
We are introducing our estimates for F’10, as follows We expect revenue to grow 25% Y/Y in F’10 to $511M We are modeling 26% Y/Y EBITDA growth, to $98M, representing slight margin expansion, and we are projecting F’10 EPS of $0.77, up 26% Y/Y
We Are Introducing a Price Target of $17
As our model calls for a negative GAAP EBIT value for Omniture in F’09, our price target is predicated on a DCF analysis, with the following parameters:
Table 145: Key DCF Assumptions
Risk free rate (10yr yield) 4.3%
Source: Company reports and J.P Morgan estimates
Table 146: Growth Profile
$ in millions
Less: Operating Expenses 423.5 514.7 602.3 678.6 748.3 802.8
As % of total revenues 103.3% 100.7% 99.0% 97.0% 95.5% 94.0%
Operating Income (Loss) (13.7) (3.5) 6.1 21.0 35.3 51.2
Operating margin -3.3% -0.7% 1.0% 3.0% 4.5% 6.0%
Less: taxes (4.1) (1.0) 2.1 7.3 12.3 17.9
Add Back: Depreciation and SBC 91.1 101.3 120.5 138.6 155.3 169.2 Less: Capital Expenditure (49.0) (56.0) (34.0) (31.9) (29.4) (24.7)
As % of total revenues 12.0% 11.0% 5.6% 4.6% 3.8% 2.9%
Plus/(Minus): Working Capital Changes (0.2) (4.3) (4.5) (4.8) (5.0) (5.3)
As % of total revenues 0.0% -0.8% -0.7% -0.7% -0.6% -0.6%
Free Cash Flow 32.3 38.5 86.0 115.6 143.8 172.6
Source: Company reports and J.P Morgan estimates
Valuation and Rating Analysis
Given Omniture’s industry-leading growth rates, continued market share gains, and
Trang 4valuation to peers’ and are maintaining our Overweight rating On an EV/EBITDA basis, Omniture currently trades at 10.0x our F’09 EBITDA estimate of $77M, compared to its peer group (platform enablers) which currently trades at 8.7x F’09 estimates
Risks to Our Rating
Omniture derives more than 85% of its revenue from subscription revenues If the company undergoes a precipitous rise in churn rates, the company’s revenue growth could be impacted The web analytics space is extremely competitive The recent acquisition of Visual Sciences is the biggest in Omniture’s history, and should the integration of the two companies turn out more challenging than currently expected, the stock could face pressure Further, Google’s offering of free analytics may entice some mid-market customers to discontinue paying for web analytics, or may pressure Omniture’s existing pricing dynamics Also, if Omniture fails to gain market share as
we anticipate, our revenue estimates could prove optimistic Finally, Omniture’s numerous enterprise customers could choose to build analytics solutions in-house, which could negatively impact the company’s growth rates
Trang 5Table 147: Omniture Annual Income Statement
$ in millions
Professional services and other 11.1 31.8 44.7 49.8
SBC Componenent of Cost of Revenue 1.9 5.2 4.4 6.1
178.1% 164.2% 30.9% 26.4%
Profit (Loss) before provision for income taxes (8.9) (42.6) (13.7) (3.5)
EPS - GAAP (w/FAS123R) $ (0.18) $ (0.62) $ (0.15) $ (0.04)
% of Revenue
Research & development 12.1% 12.5% 10.3% 10.1%
General and administrative 16.9% 15.8% 15.5% 14.4%
Growth Y/Y
Professional services and other 115.1% 185.6% 40.8% 11.4%
Research & development 97.6% 114.6% 13.9% 22.8%
General and administrative 100.0% 93.5% 35.9% 15.2%
Source: Company reports and J.P Morgan estimates
Trang 6Table 148: Omniture Quarterly Income Statement
$ in millions
1Q’07 2Q’07 3Q’07 4Q’07 1Q’08 2Q’08 3Q’08 4Q’08E 1Q’09E 2Q’09E 3Q’09E 4Q’09E
Net Income (Loss) - Pro forma 0.9 1.9 4.4 4.6 7.3 7.3 8.2 9.4 9.2 11.0 12.8 14.8
EPS - Pro forma (ex-FAS123R) $ 0.02 $ 0.03 $ 0.07 $ 0.07 $ 0.10 $ 0.10 $ 0.11 $ 0.12 $ 0.12 $ 0.14 $ 0.16 $ 0.19
% of Revenue
Growth Y/Y
Source: Company reports and J.P Morgan estimates
Trang 7Table 149: Omniture Annual Balance Sheet
$ in millions
ASSETS
Cash & cash equivalents 77.8 71.0 101.5 139.3
Prepaid expenses & other current assets 5.7 6.7 7.7 9.6
LIABILITIES
Current notes payable, capital lease obligations 4.7 5.3 6.8 8.8
Deferred Consideration related to business acq - - - -
Deferred revenues, less current 1.8 10.1 11.9 12.4
Notes payable, less current portion 2.9 7.5 9.5 12.4
Capital lease obligations, less current portion 0.2 0.1 0.1 0.1
Source: Company reports and J.P Morgan estimates
Trang 8Table 150: Omniture Annual Cash Flow Statement
$ in millions
OPERATING ACTIVITIES
Loss on disposal of property and equipment (0.0) - - -
Patent license and litigation settlement costs - - - -
Loss on foreign currency forward contract/other 0.2 0.0 - -
Changes in Working Capital
Prepaid expenses and other assets (1.6) (2.7) (7.4) (11.0)
INVESTING ACTIVITIES
Purchases of short-term investments, net (55.9) 32.2 - -
Purchases of property and equipment (CAPX) (12.0) (51.6) (49.0) (56.0)
Payment related to foreign currency forward contract (0.3) (0.3) - -
FINANCING ACTIVITIES
Proceeds from exercise of stock options 3.6 8.6 - -
Proceeds from issuance of preferred stock, net - - - -
Repurchase of preferred / vested restr stock - (1.0) - -
Proceeds from issuance of notes payable, capital leases 2.4 8.0 - -
Issuance of common stock through IPO 142.2 - - -
Principal payments on notes payable, capital leases (5.7) (7.8) - -
Effect of FX on Cash & Equivalents 0.1 (0.6)
Cash & Equivalents at Beginning of Period 68.3 77.8 71.0 101.5
Cash & Equivalents at End of Period 77.8 71.0 101.5 139.3
Source: Company reports and J.P Morgan estimates
Trang 9Orbitz Worldwide, Neutral, ($3.65)
We think Orbitz will have a very difficult 2009, as we believe it is the least well positioned OTA Despite some progress in diversifying its business away from air tickets, the business still accounts for 72% of total gross bookings Additionally, Orbitz boasts the largest leverage ratio of over 4x our F’09 EBITDA estimate However, at 2.2x our F’09 EBITDA estimate of $136M, we think Orbitz’s valuation already reflects these weaknesses and has limited downside We are reiterating our Neutral rating
• Domestic growth is likely to be muted due to weaknesses in the air business
Although we expect all travel bookings to be impacted by the weak economy, we think air products will be hit the hardest, as the industry has significantly lowered air inventory through capacity cuts With our J.P Morgan airlines industry equity analyst estimating F’09 capacity declines of 7-8% following F’08’s 7-8% declines and over 70% of OWW gross bookings coming from air products, we think this will have a significant impact on OWW top-line performance
• Top-line growth may further be hindered by promotional activity As
consumers have become more focused on value, we think Orbitz may respond with increased promotional activity Recently, the company introduced its PriceAssurance program and has sent thousands of refund checks We foresee these types of promotions continuing going forward
• High leverage will likely limit cash investments With almost $600M in debt,
Orbitz is leveraged at over 4x our F’09E EBITDA We are concerned that this could limit the company's ability to make strategic investments
• 2009 drivers In our view, the following factors will drive OWW shares in 2009:
(1) cash balance and leverage ratios, (2) shifts toward non-air products, and (3) advertising revenues
• Maintaining 4Q’08 estimates We are maintaining our estimates for 4Q
revenue, EBITDA, and EPS of $205M, $44M, and $0.05, respectively
Our current and newly introduced 2010 estimates are in the table below:
Table 151: Orbitz Financial Snapshot
$ in millions, except per share data
J.P Morgan
Revenue 205.4 895.4 865.1 921.7 6.1% -3.4% 6.5% EBITDA 44.0 145.0 136.2 143.1 -0.9% -6.1% 5.0%
Consensus
Revenue 195.8 883.3 864.9 877.3 4.6% -2.1% 1.4% EBITDA 33.2 130.8 133.4 138.3 -10.6% 2.0% 3.7%
Source: J.P Morgan estimates, Company data, and Bloomberg
Trang 10Our Estimates and Outlook for 2009
Our F’09 estimates call for revenue, EBITDA, and EPS of $865M, $136M, and ($0.27) We think domestic gross bookings will decline 4% Y/Y as the company faces airline booking and ADR headwinds We are modeling international gross bookings to decline 11% Y/Y with the same headwinds and the additional negative effect of foreign currency exchange rates However, despite the weak top-line growth, we do think the company will carefully control costs and are looking for a 10% reduction in headcount, which should reduce payroll expenses by ~$20M Although we are encouraged by the company’s intention to manage costs, we think margins will be pressured by continued marketing expenses and fixed costs As such, we are modeling adjusted EBITDA margins to fall to 15.7% from 16.2%
Our Estimates and Outlook for 2010
We are introducing F’10 revenue, EBITDA, and EPS estimates of $922M, $143M, and ($0.30) Our model assumes a healthy rebound of growth due to an easing of the recessionary environment, easier comps, and a flat FX exchange rate We are looking for US gross bookings growth of 3% Y/Y and international gross bookings growth of 17% Y/Y We expect the EBITDA margin to decline an additional 20 basis points due to likely keyword inflation
Valuation and Rating Analysis
Orbitz is trading at 2x our pro forma F’09 EBITDA estimate of $136M, which is a discount to the peer group average of 6x Given the economic and company-specific headwinds, we believe this discount is justified and reiterate our Neutral rating
Risks to Our Rating
Orbitz could outperform our expectations if 1) hotel product sales and international sales exceed our expectations, 2) further acquisitions are made in the international space, 3) the company gains market share against its existing online travel agent competitors, or 4) the online travel market achieves penetration levels beyond our current expectations
The company’s shares could underperform if the company is unable to 1) withstand the competitive threat that the travel suppliers and travel search engines pose, 2) maintain its domestic leadership position, 3) economic conditions hinder top-line growth, and 4) if it is unable to successfully expand into the international market or increase hotel sales