Why Ancestry.com Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of online family history resource Ancestry.com (Nasdaq: ACOM  ) plunged 17% on Monday after NBC said it will not renew its sponsored show Who Do You Think You Are? for a fourth season.

So what: The show -- in which celebrities trace their family history using Ancestry's services -- has been a major promotional vehicle for the company in recent years, so the cancellation is naturally triggering concerns over slowing growth going forward. Of course, Ancestry's current rate of subscription revenue growth isn't all that much higher than when the show started, making today's sell-off seem like a bit of an overreaction.  

Now what: While NBC's decision deals a short-term blow, I'd expect Ancestry to find other creative ways to market its services over the long haul. "We have a great partnership with the show's producers, Is or Isn't Entertainment and Shed Media, and we look forward to exploring other avenues of distribution," CEO Tim Sullivan reassured investors. More important, with the stock flirting with a new 52-week low and trading at a forward P/E of 11, betting on management doesn't exactly come at a high price.

Interested in more info on Ancestry? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Ancestry.com. Motley Fool newsletter services have recommended buying shares of Ancestry.com. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On May 14, 2012, at 12:42 PM, hiddenflem wrote:

    PBS still has "Finding Your Roots" which is an amazing show... though no direct promotion for ACOM takes place I imagine it helps... and would help even more once they get their DNA testing off the ground (cmon' guys it's not rocket science anymore!)

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