NEW YORK (TheStreet) -- Shares of Millennial Media (MM) are jumping by 29.48% to $1.74 at the start of trading on Thursday morning, after the advertising and marketing company announced that it has agreed to be acquired by Verizon's (VZ) - Get Verizon Communications Inc. ReportAOL unit for about $250 million.
"By joining AOL, we will be adding additional mobile expertise to AOL's growing technology assets," Millennial Media CEO Michael Barrett said in a statement announcing the deal.
Founded in 2006, Millennial Media is a Baltimore-based leading end-to-end mobile platform, and it will be acquired by AOL for $1.75 per share of the company's common stock.
The transaction will take the form of a tender offer followed by a merger, after which Millennial Media will become a wholly owned subsidiary of AOL, when the deal closes this fall.
"As we continue to invest in our platforms and technology, the acquisition of Millennial Media accelerates our competitive mobile offering in ONE by AOL and enhances our current publisher offering with an 'all in' monetization platform for app developers," AOL President Bob Lord said.
Separately, TheStreet Ratings team rates MILLENNIAL MEDIA INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate MILLENNIAL MEDIA INC (MM) a SELL. This is driven by some concerns, 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, generally disappointing historical performance in the stock itself and deteriorating net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, MILLENNIAL MEDIA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- MM's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 49.18%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Internet Software & Services industry average. The net income has decreased by 2.4% when compared to the same quarter one year ago, dropping from -$15.09 million to -$15.46 million.
- MM, with its decline in revenue, slightly underperformed the industry average of 6.8%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- MILLENNIAL MEDIA INC has improved earnings per share by 21.4% 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, MILLENNIAL MEDIA INC reported poor results of -$1.38 versus -$0.19 in the prior year. This year, the market expects an improvement in earnings (-$0.18 versus -$1.38).
- You can view the full analysis from the report here: MM Ratings Report