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Jax Daily Record Monday, Jul. 8, 201312:00 PM EST

Web.com ends June on a high note

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by: Mark Basch Contributing Writer

While the overall market was swooning in late June, Web.com Group Inc. ended the first half of the year on a high note, surging to a record high in the last week of the month.

There was no news to account for the interest in the Jacksonville-based company and no apparent rumors to send the stock higher.

Piper Jaffray analyst Gene Munster said by email that it seems "the light is going on" for investors about Web.com's increasing growth rate.

Munster projects Web.com's organic revenue growth rate to rise from about 5 percent last year to 8 percent in 2013 and 11 percent in 2014.

"The reason for this accelerating revenue growth is that the company is spending its savings from refinancing its debt early this year," Munster said in a research note last week.

He said Web.com, which provides website development services for businesses, is using the money it saved in interest payments on marketing efforts.

You've surely noticed some of the marketing steps the company has taken in the past couple of years to raise its profile, including increased TV ads and its sponsorship of the Web.com golf tour.

"The marketing program will entail a broader campaign to emphasize the increased breadth of the company's product offerings including e-commerce and social," Munster said.

He sees an opportunity for Web.com to help its small-business customers make better use of social media.

"We think of Web as middleware for small business. It is the company that connects a technology provider like Google, Yelp or Facebook to a small business that does not have the time or knowledge to do it themselves," he said.

Piper Jaffray surveyed small-business franchise owners recently and found a big opportunity for Web.com to provide help in their social media efforts.

"Our survey found that these franchisees are fluent in Facebook (70 percent use for personal life), but only 30 percent of those who already have a personal Facebook profile also use it for their businesses," Munster said.

"For Twitter, only 25 percent use it in their personal life, and 20 percent of those who already have a personal Twitter account also use it for their businesses," he said.

"For Facebook, these results tell us there is an opportunity to take an already-familiar product (Facebook) and reintroduce it to small businesses as an opportunity to use social media in a business context," he said.

Web.com's stock rose $3.03 to $25.60 during the last week of the month and reached a record high of $27.40 last week.

Munster has an "overweight" rating on the stock and a $32 price target.

Atlantic Coast Financial and ParkerVision lead local stocks

Web.com's stock increased by 73 percent overall in the first half of 2013 but it was not the best-performing Jacksonville-based company.

Atlantic Coast Financial Corp.'s stock rose 143 percent to $4.89 in the first six months of this year, sparked by a $5-a-share buyout offer that was rejected by shareholders last month.

Despite the rejection, the banking company's stock has not lost that much ground.

One other company more than doubled in price, ParkerVision Inc., which rose 124 percent to $4.55.

ParkerVision's stock has been helped by investor optimism about the company's patent infringement lawsuit against Qualcomm Inc.

ParkerVision is seeking hundreds of millions of dollars in the lawsuit, scheduled for trial in October, which alleges Qualcomm illegally used wireless technology invented and patented by ParkerVision.

One other company also recorded big gains in the first half of the year. Stein Mart Inc. rose 81 percent to $13.65 as the fashion retailer's sales improved, and Jay Stein took firm control as permanent CEO after serving as interim CEO for almost two years.

At the other end of the spectrum, Jacksonville Bancorp Inc. had the biggest decline, falling 40 percent to 48 cents. The banking company's CEO, Stephen Green, resigned in late June.

Body Central reaches 52-week high

Body Central Corp. was another stock on the rise at the end of June.

The stock rose 33 percent overall in the first half of the year and reached a 52-week high of $13.39 last week, as investors hope for a second-half turnaround after a full year of disappointing sales results.

After a presentation at a conference hosted by the firm last month, Piper Jaffray analyst Stephanie Wissink said in a research note that "aggressive markdowns" to clear inventory will impact Body Central's second-quarter results.

However, she thinks the fashion retailer is headed in the right direction.

"While near-term results are likely to fall below consensus, we are optimistic for a potential return to sales and operating stability in the second half, under new executive and merchant direction," Wissink said.

"We are encouraged by management's plan to right-size inventory levels and better align its merchandising strategy," she said.

Wissink has a "neutral" rating on Body Central's stock and a price target of just $11. However, she said "growth is scarce in retailing" and some investors are betting on stocks that have the potential for growth.

"Visibility is still somewhat clouded as to the timeline for potential recovery (for Body Central) but investor risk-tolerance appears elevated, implying the willingness to pay a higher multiple on depressed earnings," she said.

JPMorgan Chase looking up

As JPMorgan Chase & Co. expands its presence in the Jacksonville market, the banking giant's overall outlook is brightening.

Raymond James analyst Anthony Polini last week upgraded the company from "outperform" to "strong buy," citing "a more favorable outlook for EPS growth and diminished concerns for residual risk from the London Whale incident."

The "London Whale" is the nickname given a JPMorgan bond trader in London said to be responsible for a massive $6.2 billion trading loss in 2012.

JPMorgan already is a major player in Jacksonville with about 4,000 employees, most of which work in its mortgage operations.

The company has only one banking branch in Jacksonville, attached to its main mortgage office, but the Daily Record reported in March that the company had begun filing applications to build new branches in Northeast Florida.

The company in May confirmed its plans to open more than a dozen local branches which will carry the "Chase" name, with the first few scheduled to open in October.

Meanwhile, operations at the company seem to be returning to normal after years of turmoil through the financial crisis.

"As a reminder, on Tuesday, May 21, 2013, Jamie Dimon won the vote to keep his roles as both chairman and CEO of the company at the annual shareholder meeting, and we expect the earnings focus to be on operations as the company moves forward and puts the London Whale incident behind it," Polini said in his research note.

The shareholder proposal to require the company to split up the chairman and CEO roles received only 32 percent of the vote at the annual meeting.

JPMorgan will report its second-quarter earnings this week.

"We expect second-quarter results to be highlighted by strength in market-related revenue (albeit down slightly from a seasonally strong first quarter) and continued improvement in credit quality," Polini said.

International Speedway reports flat earnings

As the company prepared for the Coke Zero 400 NASCAR race over the weekend, International Speedway Corp. last week reported basically flat second-quarter earnings.

The Daytona Beach-based company, which operates the Daytona International Speedway and 12 other motor sports facilities, reported adjusted earnings of 51 cents a share for the second quarter ended May 31, down from 52 cents the previous year.

The earnings were a penny higher than the average forecast of analysts surveyed by Thomson Financial.

Revenue for the quarter was $178.4 million, down slightly from last year's $179.6 million.

While growth has slowed for now, International Speedway is looking to the future. The company last month announced a $375 million to $400 million project to redevelop the front stretch of the Daytona track.

The plan includes 11 "neighborhoods" along the nearly mile-long front stretch where fans can congregate and still watch the race in action.

"Enhancing the fan experience, which is at the heart of NASCAR's industry action plan, is central to our growth strategy," International Speedway CEO Lesa France Kennedy said in last week's earnings news release.

She said the company also is looking at possible fan-friendly renovations to its other racing facilities.

"The benefit of increasing a fan's affinity for the sport is significant, and we expect it will translate into increased long-term cash flow, earnings visibility and value for our shareholders," she said.

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