Bankrate (RATE): Business Update - Needham
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Needham & Company analyst, Laura Martin, reiterated her Buy rating on shares of Bankrate (NYSE: RATE) after meeting with management to get a business update.
Good news is that Bankrate.com has lived through the shift from $70/1000 CPMs from its direct salesforce ad units to $8/1000 CPMs for programatic, which took its display revenue from $48mm in 2014 to $35mm in 2016E, down 27%. Dynamic pricing at Bankrate.com is now complete, compared to $14/click one year ago every day at all times of day. The analyst believes it sounds like the worst of this pricing headwind is behind RATE.
The bad news is that RATE plans for a $100mm marketing spend over the next 12 months. This suggests that EBITDA margins will remain under pressure, although EBITDA dollars should rise. RATE’s step-up in marketing spending is required to compete with new entrants. This makes the analyst wonder if the marketing spending will be ROI positive, and what happens after the upfront spend.
No change to the price target of $15.
Shares of Bankrate closed at $8.08 yesterday.
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