Vocus, Inc.: Spread the word
Spreading the good word—or bad—is both easier and more difficult for companies in the Internet age.
The conundrum is that while the World Wide Web has drastically improved channels of communication, messages get lost in the din of an always-on, free-flowing data surge that can overwhelm surfers and CEOs alike.
Vocus, Inc. (Nasdaq: VOCS) is a Lanham, Md.-based company that tries to help its clients cut through the clutter in delivering their messages to the news media and other audiences with the software and online services that automate many functions of public relations and corporate communications.
Apparently the company, which launched its first products in 1999, has succeeded in getting its message across to analysts. Of the nine analysts surveyed by Thomson Financial, five have Vocus at the equivalent of a “strong buy,” three have it at “buy” and just one says “hold.”
With good reason. Compare a chart of the Vocus share price against the Russell 2000 index of smaller companies and the performances this year are strikingly different. While the Russell has been about flat to down for the year, Vocus shares have been heading mostly higher—despite a November pullback from the all-time high of $38 that was hit on Oct. 30. The stock’s low has been $15.60, while shares closed at $31.99 on Thursday.
The only thing lacking for investors considering a stake in Vocus is a long-term track record. Vocus went public in December 2005, but it’s been fairly consistent at delivering pleasing results in the past two years.
According to a survey recently conducted for Vocus, less than a third of public relations professionals utilize any sort of automation in managing their relationships, demonstrating just how underpenetrated the sector is.
The Vocus on-demand, Web-based product lineup is growing. The company sells various suites of software, keyed to businesses of varying sizes and purposes, including government relations. There are a number of add-on modules available to help handle such chores as monitoring print, broadcast and Internet news sites for relevant coverage, coordinating e-mail campaigns and providing the analytics tools to measure various metrics.
Last year, Vocus acquired PRWeb, an online press release distribution service that competes with the likes of PR Newswire and Business Wire. In addition to its other PR and communications products, Vocus introduced in August a service that distributes press releases specifically about public interest and political issues. It also provides tools to incorporate multimedia such as YouTube video into a press release.
In April, Vocus held a follow-on public offering that was priced at $19.50 and raised $22.4 million for the company.
Vocus reported solid third-quarter results, with revenue of $15.1 million representing a 40% year-over-year growth. For the quarter ended Sept. 30, Vocus posted net income of $475,000, or $0.03 per share, more than tripling the year-ago profit of $150,000, or $0.01 per share. Operating margin increased to 16% from 8% the year before.
The company’s U.S. business grew 37%, while its international business doubled and accounted for 9% of its third-quarter revenue. Vocus said it had 210 net new subscribers in the quarter, compared with the 73 that it had picked up in the 2006 quarter. It headed into the current quarter with 2,214 active subscription customers.
Many of the analysts who follow Vocus have offered positive—if not downright glowing—comments about the company and its potential.
This month, Montgomery & Co. became the latest to focus on Vocus, initiating coverage with a “buy” rating. In setting a $41 price target, analyst Brian Schwartz wrote to clients that he views Vocus as an attractive value proposition that’s poised to perform well even in an economic slowdown, since it does not require up-front capital commitments and helps companies cut costs.
Those thoughts echoed other recent analyst views. Broadpoint Capital’s Bradley Whitt initiated coverage of Vocus as a “strong buy,” setting a $43 target price in a Nov. 6 report. Richard Baldry of Canaccord Adams started coverage of the company on Nov. 9 with a “buy” rating. Soleil-Channel Mark Capital’s Christopher Rowen also initiated coverage of Vocus in early October, at a “buy” rating with a $39 price target.
Following the release of third-quarter results, analyst Robert Breza at RBC Capital Markets maintained an “outperform” rating on Vocus on Oct. 24, but boosted the 12-month price target to $35 from $32—because of robust results posted ahead of its most robust business quarter of the year.
Raghavan Sarathy of Ferris, Baker Watts maintained a “neutral” rating on Vocus, with a $31 price target, following the Q3 earnings report, telling clients that the stock is fairly valued. But Vocus is viewed as “overweight” by Thomas Weisel Partners’ analyst Tom Roderick, who boosted his price target to $37; Weisel was the lead underwriter on the Vocus IPO and follow-on.
There were no mixed messages coming from analyst Laura Lederman of William Blair & Co. Following the third-quarter results and after an early-November trip to London with Vocus executives, the Blair analyst twice reaffirmed her “outperform” rating. The Nov. 5 note to clients pointed to the company’s international growth potential, citing the recent sizable increase in its British operations.
Similarly, Wachovia Capital Markets senior analyst Philip Rueppel met with Vocus executives in Boston, then reiterated in a Nov. 13 report his “outperform” rating and placed the share valuation range at $35 to $38. Rueppel said that despite recent U.S. economic turmoil, “we continue to believe there is upside potential in future periods, as the competitive environment for Vocus remains fragmented and the company continues to execute on its growth plan.”
Going forward, analysts surveyed by Thomson Financial are looking for a 31% increase in earnings per share to $0.13, and a similar growth in revenue to $16 million for the current quarter. The survey is predicting 89% EPS growth to $0.49 for all of 2007, with a 43% revenue increase to $58 million. The most recent Thomson Financial median price target is $38.
The message on Vocus (VOCS) is coming through loud and clear: Going public gave the company some additional capital to tap into a market with tremendous potential and assemble more tools to meet the needs of a growing list of clients.
