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Why Bazaarvoice (BV) Is Climbing Today

NEW YORK (TheStreet) -- Bazaarvoice (BV) moved higher on Wednesday after announcing it had signed a non-binding letter of intent Viewpoints to divest its PowerReviews Business.

By late afternoon, shares had added 8.3% to $7.71.

The company which develops software for online product ratings and reviews said it would sell the unit to Viewpoints for an undisclosed amount. The deal follows on from a court ruling earlier in the year from a Department of Justice antitrust suit.

"Since the district court issued its ruling in favor of the Department of Justice, we have been engaged in a thoughtful process to identify and reach agreement with an appropriate entity to which we could divest the PowerReviews business consistent with the Court's decision and views expressed by the DOJ," said Bazaarvoice CEO Gene Austin in a statement.

Bazaarvoice originally bought PowerReviews in 2012 in a transaction consisting of $31 million in cash, 6.4 million shares and 1.6 million stock options.

The transaction is expected to be completed in the first quarter of Bazaarvoice's fiscal 2015 ending July, subject to regulatory approval and the completion of negotiations.

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TheStreet Ratings team rates BAZAARVOICE INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate BAZAARVOICE INC (BV) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet Software & Services industry and the overall market, BAZAARVOICE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$18.99 million or 181.67% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • In its most recent trading session, BV has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • BAZAARVOICE INC has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BAZAARVOICE INC reported poor results of -$0.93 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings (-$0.26 versus -$0.93).
  • The gross profit margin for BAZAARVOICE INC is currently very high, coming in at 72.78%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -16.59% is in-line with the industry average.
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