Submitted by Covestor Ltd. as part of our contributors program.
Author: Kris Tuttle
Covestor model: Soundview Technology
Our takeaway after meeting with management is that the company provides lots of hand-holding for one and two-person companies that do not have any technology skills.
That’s hardly an exciting investment.
We first talked about the stock as a short back in October of 2007 at $24 and published a fuller note on the company with a $14 intrinsic value estimate in February of 2008.
Most of the negative thesis of that research report remains true.
But acquisitions, especially the recent purchase of SinglePlatform, have now blurred the picture even more.
We’ve uploaded the report and here is the link (PDF): Constant Contact CTCT Update February 2008
Spending $100 million for SinglePlatform, an also-ran in the online restaurant menu and promotion space, is not good. The number of employees is rather small and only about $5 million has been invested in the company.
That’s one hell of a premium.
If Constant Contact had acquired this company for $15-20 million, I think we would all give management the benefit of the doubt and at least give them credit for being a disciplined buyer.
But that’s not the case here.We also note that there are larger and more successful private companies like yext.com in this space.
Not everyone out there follows our Twitter stream so you may have missed a quote we took from an online forum on email marketing where experts expressed the fact that,“you probably won’t go wrong in choosing any leading platform from Mailchimp to Aweber as long as you don’t end up with Constant Contact.”
Constant Contact is not out to impress anyone who is technically savvy.
But in this world of “consumer driven IT”, that strategy is not working.
Consumers and their generally available technologies just keep getting better. And Constant Contact keeps looking clunkier.
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