This Unknown Dot-Com Is Going to Own Christmas

When it comes to digital coupons, no one comes close to RetailMeNot (NASDAQ:SALE), and the recently public dot-com speedster proved it with strong quarterly results after Tuesday's market close.

RetailMeNot's revenue climbed 39% to $47.4 million, just ahead of the $45.9 million that analysts were targeting. The path down to the bottom line wasn't as kind. Being the top site when it comes to coupon codes has its benefits, but it also requires a lot of capital being invested in promoting the eclectically titled website and expanding marketing relationships. Nearly every expense item grew faster than RetailMeNot's seemingly torrid top-line growth. The end result is that net income declined from $6.6 million to $5.6 million. Yes, that still results in welcome double-digit net margins, but we're not done. Shell out a preferred stock dividend and RetailMeNot's bottom line is in the red. However, if we take net income before the payout and divide it by the 38.2 million shares used in the statement's calculation, we hit the $0.15 a share that analysts expected.

The mixed showing may not seem all that impressive, but investors will want to keep an open mind in approaching RetailMeNot's potential heading into this holiday shopping season. 

RetailMeNot's 132 million visitors during the third quarter may not seem all that impressive, but keep in mind that these are people hitting up the website or firing up the app because they want to get a deal. They want to buy something, and that's the juiciest niche of the World Wide Web.

RetailMeNot's average revenue per visit was a whopping $0.36 for the quarter, up from $0.23 during the same period two years ago and just $0.31 last year.

This is definitely the kind of momentum that investors want to see heading into the seasonal spike in traffic during the fourth quarter. RetailMeNot has historically experienced a healthy sequential 33% bump in visits between the third and fourth quarters of last year. It was an even more impressive 46% sequential pop a year earlier. Did I mention that revenue per visit has also increased nicely sequentially during the holiday quarter in the past? In short, this is shaping up to be a monster quarter from a relatively obscure company that's set to cash in big this season.

RetailMeNot has mastered the networking effect. The traffic comes because it's the one with the most coupon codes, but then that also draws merchants wanting to make sure that they can get their best deals through and willing to even offer exclusive deals through RetailMeNot.

The weather's starting to turn. The holiday decorations are starting to go up. It's RetailMeNot's time to shine.