IB Net Payout Yields Model

Velti Surges On Large Mobile Marketing Deal With 30 Day Terms

Velti (VELT) announced a $27M deal for two years of mobile marketing services for a major US brand. The stock is soaring 13% in part due to the size of the deal, but most importantly is the payment terms of 30 days.

The stock was absolutely crushed earlier this year on the news of weak DSOs and cash flow issues from European customers that were taking 270 days to pay bills. The recent 70% revenue growth in Q2 didn't push the stock up as investors remained concerned that customers were not paying bills.

With the stock trading at a forward PE below 10, this stock has huge upside as this deal highlights the demand for mobile marketing. It also confirms management statements that US customers would pay on better terms making the going forward DSOs significantly lower.

While the chart below shows a stock that has nearly doubled from the lows, it also highlights one that hasn't even recovered from the May highs. If investors start believing in the story, this stock has huge upside.Velti is one of the very few companies growing at a 50% clip that is very profitable. The nearly $1 in earnings expected for 2013 would typically be worth well over $25.

Disclosure: Long VELT. Please review the disclaimer page for more details. 


Mark Holder said…
Interesting Needham estimates based on this deal:
“We anticipate Street consensus will have to move upwards towards our CY13 estimates of $398m and $1.02 EPS,” added Zeller.

Needham has a Buy rating and $13 price target on VELT.

So a 9.5 forward PE prior to the surge today. Needham really stepped out on that ledge.

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