Single Most Important Valuation Driver: A Wall Street Transcript Interview with Laura Martin, CFA, a Managing Director and Senior Analyst at Needham & Company, LLC
67 WALL STREET, New York - May 9, 2014 - The Wall Street Transcript has just published its Internet Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Increased Mobile Content Traffic - Chinese Online Monetization Trends - Social Networking Economics - Chinese Internet Market - Mobile Monetization - Internet Content Providers - Data Security
Companies include: Bankrate Inc. (RATE), Walt Disney Co. (DIS), Yahoo! Inc. (YHOO), Pandora Media, Inc. (P), Twitter, Inc. (TWTR), and many others.
In the following excerpt from the Internet Services Report, an expert analyst discusses the outlook for the sector for investors:
TWST: You cover content providers. What are the major trends you are seeing with the Internet content providers?
Ms. Martin: My coverage includes content companies online and offline. I am specifically focused on how content is being redefined in the Internet age, and how the economics are shifting as content migrates to the digital world. The biggest distinction we've seen between these two groups is a rotation out of high multiple online content stocks since March. Staying with my online content companies, the biggest valuation trend is that we're seeing a huge premium being paid for mobile revenue.
Pandora (P), Facebook (FB) and Twitter (TWTR) have more than 50% of their revenue from mobile and command three to five times multiple point premiums for this fact. Why? In huge parts of the world, there are users who access the Internet only via their smartphones. They don't have tablets; they don't have laptops. In fact, Facebook disclosed in their 1Q14 earnings that 55% of their 1.3 billion users access Facebook only via smartphone.
By implication, if a company has figured out how to monetize its product via smartphone, its growth trajectory is higher and longer because it may be able to generate money from big parts of the world that other companies cannot. If a company is able to crack the code on mobile monetization, its multiple expands three to five times revenue because it has an option to monetize half the world's population.
Every company in the Internet space is trying to solve the hard problem of how to monetize on mobile devices. It's just a really hard problem to solve. Consumer demand on mobile devices has been growing at triple digits for three years. Most Internet companies we cover get 40% of their traffic on mobile devices, but only 10% of the revenue from mobile devices. Closing that gap is the single most important valuation driver.
TWST: Right now, who is best positioned then with that particular mobile switch?
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
