This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Tech IPO Constant Isn't Worth Its Price Tag

Nearly every week seems to mark the birth of at least one new tech IPO star, but a close look at recent debutante Constant Contact (CTCT) shows that not all are burgeoning with the same promise.

Constant Contact has spent years building up a strong business and market footing in an overlooked sector. Its reliance on a Web-based, on-demand product seems to resonate among not-so-tech-savvy clients who want an easy way to keep in touch with their own customers.

Like iMergent (IIG), whose stock has been volatile over the past couple of years, Constant Contact offers a hand-holding relationship to small companies, from wine stores to individual "power sellers" on eBay (EBAY), allowing them to use a browser to send email updates and newsletters to contact loyal customers.

And that, combined with the popular on-demand model, seemed to be enough to drive the company's stock to $30 the day after its debut last week, nearly double its offering price of $16. It's only the latest in a host of tech companies to have gone public since August and see their stock rise more than 50% on the first day.

The stock was trading recently at $26.19, off 2.8%.

But there are some factors that make the high post-IPO valuation seem puzzling: Despite its lengthy history, the company is still posting losses, and rather than benefiting from the economies of scale that other on-demand companies are seeing, some costs are rising.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,172.68 -107.06 -0.62%
S&P 500 1,994.29 -16.11 -0.80%
NASDAQ 4,527.6890 -52.10 -1.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs