Amid disappointing news that Bankrate.com (RATE) would cut 2008 revenue guidance by 2%, resetting expectations between $164 to $169 million, some analyst are rushing in with rating upgrades.
Why?
Because Tom Evans is smart and Bankrate.com has a sturdy platform for weathering economic and advertising storms. The masterful management of expectations early sets a nice low bar to continue their trend of beating earnings estimates for the balance of a tough 2008.
It is unquestionable that financial services online advertising is and has been soft for some time, but fundamentally Bankrate.com continues to protect strong gross margins. This continued strength in producing cash allows it opportunity to continue manuevering a productive, even catalytic path.
Here are the investor themes that I like in Bankrate.com right now:
- Share price: A quick 12% drop in share price to the 52-week low makes a nice discount opportunity.
- Opportunities for more acquisitions: Not everyone in the lead generation space is so healthy. There are excellent firms potentially available at discounts. Bankrate.com has a great platform to hang other verticals from and NCD and Insureme have shown Bankrate.com has figured out how to leverage acquisitions.
- Rate tables: Consumers love them and Bankrate.com seems to be able to continue to increase the price on these simple links.
- Other verticals seem to remain strong: Bankrate.com continues to report that the softness remains contained to the mortgage sector, while deposit, credit card, and insurance remain strong. This seems supported by other lead generation market comparables.
Here are the lead buyer themes I like:
- Rate tables convert: Consumers, especially Internet consumers, love the bottom line and that means rate and payment.
- Obviously there is a theme here: New entrants trying to remain strong in the space are launching similar, maybe even more interesting, products–ratezip.com, ratespeed.com, ratewindow.com
Here are the consumer themes I like:
- Rate volatility: For the foreseeable future the rate markets, for all sorts of financial services and products, will continue to be volatile. This is the fundamental premise of Bankrate.com.
- Mortgage market anxiety: Trillions of dollars in mortgage originations will still happen in 2008. The uncertainty will drive people to the Internet for information.
- Trusted content: Bankrate.com has a premier trusted financial information brand.
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