Icarus, meet your new friend Bankrate
Financial rate publisher Bankrate has finally flown too close to the sun with its waxy wings, lowering its guidance this morning in light of display advertising weakness.
The company's new revenue and EBITDA targets -- $164 million to $169 million and $54 million to $58 million, respectively -- are still healthy advances over last year's production. The midrange of Bankrate's guidance still calls for the company's top line to grow by a healthy 74%, with a respectable 36% uptick in EBITDA. However, it's still $5 million below its earlier revenue projection and a more problematic $10 million haircut in EBITDA.
The news is probably a shock to those who know the Bankrate model well, and a "no duh" moment to those who follow the company at a distance. After all, one would expect that a company that relies on financial-services providers to bring home the bacon would get slaughtered as lenders and other banking institutions start flopping.
Survival is half the battle
The catch is that the industry's weakness has benefited Bankrate in the past. Financial-services providers have clearly scaled back their marketing budgets through more conventional channels. You're probably not seeing nearly as many "what's in your wallet?" televised spots from Capital One Financial
Bankrate is different, though. Financial firms pay Bankrate to have hyperlinks inserted into the site's rate listings, resulting in direct leads. You don't want to cut that from your marketing spend, especially if doing so would make your rivals stand out even more. Since Bankrate is the golden standard for several different rate gauges, it has held up well even in light of stingier credit markets, through folks looking up things like money market and CD rates as parking places in a volatile market.
The company's cost-per-click lead-generation business continues to do well. Bankrate is only talking down its display advertising business, consisting of the graphical ads that appear alongside the website's pages.
Other shoes may fall
This doesn't mean that Bankrate is completely immune from any future shortfalls on the non-display side. Bankrate still needs to draw eyeballs to its online and print listings to remain relevant. You don't need to see General Motors
Online lead generators still need stable niches to thrive. Whether we're talking about InsWeb
Bankrate isn't there yet. The Motley Fool Rule Breakers recommendation is clearly still growing. It's hard to scoff at 74% projected revenue growth, in any business climate. Nervous investors have already discounted a slowdown, shaving 42% off the stock's 52-week high, even before this morning's news sent the stock opening 20% lower.
But this doesn't necessarily mean that today's plunge is a dinner bell for value hounds. Watching Bankrate slash its EBITDA guidance more aggressively than its top-line markdown is a sign that future vulnerability will hit Bankrate even harder.
Yes, the company will keep flying. Its wings of wax live on. Just keep an eye on that sun, making sure that things don't heat up even more.
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