ROO Group, Inc. reiterated with a “buy” on Universal Music UK deal
Merriman Curhan Ford Wednesday reiterated its “buy” rating on digital media company ROO Group, Inc. (OTC:RGRP) based on a deal with Universal Music UK.
Universal chose ROO Group to launch 130 online video players that will feature exclusive Universal video content from its artists. As a result of the deal, ROO plans to launch its video players across all of Universal’s major sites, including Universal’s portfolio of label sites such as Mercury Island, UCJ and Polydor Records.
“[The deal] should be meaningful for ROO Group,” Merriman Curhan Ford analyst Richard Fetyko wrote in a research note. “We believe that ROO Group remains positioned to capture meaningful share of the online video market, which remains in nascent stages.”
According to Fetyko, this backlog represents a multimillion-dollar annual revenue opportunity for ROO. “ROO has bagged [the deal] but needs to push across the finish line,” Fetyko wrote.
Universal Music UK will add 130 websites to the backlog of 500 websites that ROO Group already plans to make live in the next 1-2 years. These websites emerged from deals announced earlier this year with News Corp, Trinity Mirror, VNU, and mtvU, among others. ROO Group currently has 400 operational websites. Fetyko says once the backlog is rolled out, ROO Group’s distribution network could more than double.
Fetyko says quarter over quarter revenue growth could be “lumpy,” but that the company has a backlog that could double its current revenue run rate.
Fetyko currently forecasts a loss for fiscal year 2007 of $0.56 per share on revenues of $16 million and a loss of $0.39 per share on revenues of $26.3 million for fiscal year 2008.
Fetyko’s estimates are above the EPS consensus of 2 analysts surveyed by Thompson Financial of a loss of $0.58 per share for fiscal year 2007 and a loss of $0.46 per share for fiscal year 2008.
Shares of ROO Group traded up 1.01% or $0.02 to $2.01 in mid-day trading Wednesday.
