Dot-Coms: 2 Safer Stocks to Consider
1. Ancestry.com (ACOM)
Tracking a family tree has always been a lot of fun, and this company makes it easier than ever, offering a set of online tools that track the branches as they spread outward from the tree. The company has garnered great buzz from a companion TV show called "Who Do You Think You Are?" which airs on NBC.After a late 2009 debut, Ancestry.com settled into a predictable groove. The company topped estimates, issued bullish forecasts and shares marched ever higher. Analysts began to speak of 30% or 40% annual growth and investors got pretty carried away. Shares are now far from the peaks of last spring, in part because management warned investors last fall that growth was starting to cool from a torrid pace. This was partially the result of a change in pricing schemes to emphasize longer-term subscriptions and reduced customer churn. Clearly, this is a company entering into the second phase of its growth cycle. Sales rose more than 30% in 2010 and 2011, but are likely to rise at half that pace in 2012 and 2013. Considering less than 2% of all Americans have looked into their family histories, it's reasonable to assume decent long-term growth as the metric moves up to 3% or 4%. Analysts at Dougherty & Co. say investors are now too bearish on the company's prospects, and predict shares could rebound back to $35, or nine times their projected 2013 EBITDA estimate. Goldman Sachs has an identical price target, noting that peers tend to trade for 12 or 13 times EBITDA. And this is my main point: It's best to pursue more reasonably valued dot-com plays. Ancestry.com, with a multiple lower than its core earnings growth rate, fits the bill.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
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.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
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.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV