Constant Contact $27 Fair Value: Social & Mobile Marketing to Drive Growth
Constant Contact (NASDAQ:CTCT) announced its earnings for Q1 2012, with revenue increasing to $60 million, up 20% year-over-year. It was able to maintain its relatively high gross margin at around 70%, and continued to add paying customers, adding nearly 45,000 gross new customers during the quarter. The company made a number of significant product launches in Q1 2011, which should drive earnings for subsequent quarters.
Constant Contact offers a complete set of online marketing tools, including email, event, social media and mobile marketing, and competes with the likes of Groupon (NASDAQ:GRPN), Living Social, Eventbrite, iContact, Surveymonkey as well as Salesforce.com (NASDAQ:CRM).
Check out our complete coverage of Constant Contact
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- Constant Contact Earnings: Results Were Good Year-On-Year But Fell Short Of Guidance
- Constant Contact Pre-Earnings: Improved Marketing Strategies, Continued Alliances And ‘Galileo’ Could Drive Revenues
- Constant Contact: What Lies Ahead
- Constant Contact Performed Better Than The Previous Quarter, Though Customer Growth Yet To Recover
- Constant Contact Q2 Earnings Preview: Recovery Expected Post The Change In Brand Positioning
Customer growth and ARPU to drive earnings
The company continues to add new paying customers, adding nearly 45,000 gross customers last quarter. The customer base grew to 510,000 paying customers by the end of March 2012, which is pretty much in line with our expectations. We expect the average customer base to reach 533,000 in 2012, and continue to increase till the end of our forecast period.
Constant Contact has been rolling out a series of new social and mobile marketing offerings, and continues to add additional features to its current range of services. It reported that its latest social marketing offering – Social Campaigns – already has over 35,000 users and that its daily deals offering – SaveLocal – has seen good traction. We expect it to add more features and further bolster its online marketing portfolio, which should help it become the complete online marketing solution for small businesses. This should result in higher ARPU through greater upselling opportunities.
We currently have a $27 Trefis price estimate for Constant Contact, which stands nearly 10% above its market price. Online content marketing accounts for all of its value.
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