RBC Capital Downgrades RetailMeNot Inc. (SALE) to Sector Perform

RBC Capital downgraded RetailMeNot Inc. (NASDAQ: SALE) from Outperform to Sector Perform with a price target of $24.00 (from $42.00).

Analyst Mark Mahaney commented, "SALE reported Miss & Lower Q2 results. The magnitude of the guidance cuts surprised us, yet we see still see risk in the H2 outlook, are concerned about long-term Google disruption risk, and don’t view valuation as compelling now. Downgrading to Sector Perform and lowering price target to $24."

The keys in the quarter, according to the analysts were: Positives: 1) Stable And Strong Visits Growth – Total Q2 Visits growth of 27% Y/Y was consistent with Q1, with balanced growth from Desktop Visits (up 11% Y/Y) and Mobile Visits (up 75% Y/Y), although our read is that trends may have sharply corrected in the latter half of the quarter; and 2) Continued Momentum in User Metrics – Mobile App Sessions grew over 500% Y/Y to 169MM, while Email subscriber growth clocked in at 97% Y/Y. Negatives: 1) Lowered H2 Outlook – Implied H2 Revenue outlook lowered by approx. 10% and EBITDA outlook lowered by approx. 18% – we had anticipated a tweak-down, not a slash-down; and 2) What Could Be A Lengthy Transition Away From Organic Search – still 64% of SALE’s Q2 traffic…the lesson here may well be that unless the company has achieved clear consumer critical mass (e.g., YELP, TRIP), the more strategically well positioned companies are the major SEM players (PCLN) and not the SEO players (SALE).

The firm cut ’15 Rev and EBITDA estimates by 6% and 14%, respectively, to $331MM and $119MM.

For an analyst ratings summary and ratings history on RetailMeNot Inc. click here. For more ratings news on RetailMeNot Inc. click here.

Shares of RetailMeNot Inc. closed at $25.30 yesterday.

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