U.S. Markets close in 1 hr 5 mins

Millennial Media shares fall on weak revenue

The Associated Press

Millennial Media Inc.'s shares sank Wednesday after the mobile advertising company announced an acquisition, reported disappointing quarterly revenue and issued a weak revenue forecast.

THE SPARK: Millennial said it will buy San Francisco-based Metaresolver in an all-cash deal for an undisclosed price. Metaresolver is a privately held media buying business that analyses data to help companies target their campaigns.

On Tuesday Millennial reported a profit of $2.6 million, or 3 cents per share, for its fourth quarter versus a loss of $1.2 million, or 7 cents per share, in the fourth quarter of the prior year. Revenue jumped nearly 68 percent to $58 million.

Analysts polled by FactSet forecast earnings of 3 cents per share on revenue of $62.9 million.

Millennial said expects revenue for the first quarter to be in the range of $48 million to $50 million. Analysts had forecast revenue of $56.7 million. The company also forecast full-year revenue between $270 million and $280 million. Analysts expected $290.1 million.

THE BIG PICTURE: Mobile advertising is still in its early stages of development, Paul Palmieri, co-founder, president and CEO of the company, said Wednesday. The company has delivered major revenue gains and thinks it has tremendous growth potential.

THE ANALYSIS: Janney Capital Markets analyst Richard Fetyko said the fourth-quarter snag does not change his bullish long-term view of the company. He said the revenue miss was due to a handful of brand advertiser campaigns not coming through to the extent expected and a shift in campaigns to advertising types that the company chooses not to handle. He also believes the company may be offering conservative guidance.

"Millennial remains well positioned to capture a major share of the rise in mobile ad budgets, and we think that 2013 will be an inflection point in the industry," the analyst said in a research note.

Fetyko has a "Buy" rating on the shares.

SHARE ACTION: Shares fell $5.10, nearly 36 percent, to $9.23 in midday trading. The stock is close to the bottom of its 52-week trading range of $9 to $27.90.