Based on fundamental financial analysis Millenial’s (MM) IPO is fully priced at $25, which is a 150% increase of the price range mid-point earlier this week.
MM’s original price point mid-range was $10, it priced at $13 and today trades around $25, for a 150% increase from the original price range mid-point, see table below.
| Mrkt | Price / | Price / | Price / | Price increase | |
| Millennial Media | Cap ($mm) |
Sales | Earnings | BookValue | over original mid-point |
| original mid-point, $10 | $750 | 5.4 | -18750 | 6.6 | |
| ipo price, $13 | $975 | 7.0 | -24375 | 8.6 | 30% |
| 1st day price, $25 | $1,875 | 13.4 | -46875 | 16.4 | 150% |
REVENUE GROWTH
Yes, MM as great top line revenue growth of 110% for 2011 compared to 2010, with a 37% increase in top line revenue for the December 2011 quarter versus the September quarter.
MARKET SHARE
Millennial Media has with a 16.7% market share, according to IDC. It’s second only to Google (GOOG) which has a 23.8% share, while Apple (AAPL) is third with a 15.1% share.
LIMITED ABILITY TO SET PRICES
Apple and Google are probably not running their mobile advertising businesses strictly as profit-making units, which puts MM at a disadvantage. In other words, AAPL and GOOG may cut mobile advertising rates in order to give their own ad space offerings a competitive advantage. MM doesn’t appear to have pricing power in the market.
CONSISTENT QUARTERLY EXPENSE PERCENTAGES
MM’s gross profit margin is only 39% and the expense ratios are fairly consistent. And for the past six quarters MM is essentially breakeven showing a slight loss. Therefore, it’s hard to see how the income statement can be leveraged to show significant profit, even with exploding revenue increases.
FINANCIALS
ratios based on the original price range mid-point
| Millennial Media | MM, C, 7.5 | Post IPO shares: 75mm | ||||
| Mobile adv platform | Dec 31 fiscal | |||||
| Baltimore, MD | 2010 | 2010 | 2011 | IPO Mkt | ||
| Revenues ($mm) | $16 | $48 | $104 | Cap | ||
| Gross profit % of revenue | 29% | 34% | 39% | $0 | ||
| Pre-tax loss | -$8 | -$7 | -$1 | @$10 | ||
| Pre-tax loss % of revenue | -48% | -15% | -1% | |||
| Adj EBIDTA | -$7 | -$6 | $2 | |||
| Adj EBIDTA % of revenue | -44% | -13% | 2% | |||
| Quarterly results | Sept, ’10 | Dec, ’10 | March, ’11 | June ’11 | Sept ’11 | Dec’11 |
| Revenues ($mm) | $11 | $19 | $22 | $22 | $25 | $35 |
| Revenue increase over prior qtr | 73% | 13% | 4% | 13% | 37% | |
| Gross profit % of revenue | 36% | 35% | 37% | 39% | 39% | 39% |
| Sales & Mkt % of rev | 18% | 13% | 16% | 16% | 13% | 12% |
| Tech & Dev % of rev | 5% | 3% | 3% | 5% | 6% | 5% |
| General & Admin % of rev | 25% | 27% | 18% | 21% | 21% | 21% |
| Pre-tax loss | -$1.3 | -$1.7 | $0.0 | -$0.6 | -$0.2 | -$0.1 |
| Pre-tax loss % of revenue | -12% | -9% | 0% | -3% | -1% | 0% |
