Why Millennial Media (MM) Popped on Monday Morning

NEW YORK (TheStreet) -- Mobile advertising firm Millennial Media (MM) popped on pre-announced fourth-quarter financials and on news its CEO and chairman was stepping down. By mid-morning, shares had topped 9.2% to $7.33.

The micro-cap said it expects revenue for the December-ended fourth quarter between $106 million and $109 million, a hike from the company's previous expectation of $95 million to $100 million. Analysts surveyed by Thomson Reuters had estimated revenue of $88.77 million.

The Baltimore-based business also said its integration with Jumptap, a mobile advertising network company acquired in August last year, was ahead of schedule and contributed to fourth-quarter performance.

The company is slated to release fourth-quarter and full-year financials on Feb. 19.

Separately, Millennial Media announced its founder, chairman and CEO Paul Palmieri had resigned from his post, effective immediately. Palmieri will pursue a role at New Enterprise Associates, a venture capital firm.

Michael Barrett, former chief revenue officer at Yahoo! (YHOO), will assume the role of CEO and board member.

"The mobile market is on a steep growth trajectory and I look forward to building on the leadership position Paul and the team have created to bring Millennial to new heights. I have long admired the company's ability to deliver superior monetization to its publishers and developer partners and powerful ad solutions to its brand and performance advertisers," said Barrett in a statement.

TheStreet Ratings team rates MILLENNIAL MEDIA INC as a Sell with a ratings score of D. The 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 deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 159.9% when compared to the same quarter one year ago, falling from -$1.77 million to -$4.60 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. 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.
  • Net operating cash flow has significantly decreased to -$0.27 million or 272.07% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 39.97%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 200.00% compared to the year-earlier 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.
  • MILLENNIAL MEDIA INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, MILLENNIAL MEDIA INC reported poor results of -$0.07 versus $0.00 in the prior year. This year, the market expects an improvement in earnings (-$0.04 versus -$0.07).

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