Canaccord Genuity recently upgraded this social media stock to ‘Buy’.
MeetMe, Inc. (MEET)
From Top Stocks under $10
Friday’s strong jobs report confirmed we’re on sound economic footing. So I recommend you add a new stock that’s capitalizing on the boom in online dating and social media use.
The company is MeetMe (MEET, Rated “C+”), a firm that aims to bring people together for more casual “meets” versus formal dates. That’s an approach that resonates with Millennial customers, and it’s a different one than what traditional online dating services use.
Overall, MEET has an incredibly ambitious plan—to become the next Facebook! But even if MEET never gets that big, the company sure does have strong growth already, and it’s gaining more users every day. MEET now has over 10 million monthly active users thanks to a recent acquisition, and a large user base of those coveted Millennials. Plus, the stock is trading at a low valuation of only 6.2x trailing earnings, less than half of the market.
So, sure, there’s competition from the likes of other dating apps. But this company is showing it can execute by differentiating its message from everyone else’s. Just check out this graphic, which shows how engaged its users are, and how fast that user base is growing:
In the most recent quarter, MEET beat expectations on both the bottom and top lines—continuing a trend of strong growth numbers and breaking records, while surprising many of its critics. Sales increased 47%, thanks to 62% growth in mobile revenue, showing the fruits of initiatives to focus on its mobile business.
Earnings were also boosted by the accretion of profits from its recent acquisition of Skout. People had written this stock down due to competition for dating and meeting services, but MeetMe proved them wrong. The company further announced that it is acquiring If(We) – a profitable social network platform startup, with 56% mobile revenue growth.
MEET shares rallied strongly after its earnings beat and news of another wealth-creating acquisition—to over $6 from around the $5 level. So, we missed the initial move. But now, thanks to a secondary share offering designed to raise funds for the acquisition and other corporate needs, the stock is down closer to the $5 level again. That’s giving you another chance to scoop up shares in this fast-growing company with a management team that has proven it can execute.
There may be some more short-term volatility, given that the shares were priced at $5. But since MEET is off more than 37% from its 52-week high, and since it is in a much better financial position, I don’t think it will be too long before the upside prevails. My price target is $7.50 in the next 12 months, well below the consensus of $9, but considerably higher from current prices.
Buy MeetMe, Inc. (MEET) at $5.25 or better, GTC.
Mandeep Rai, Top Stocks Under $10, Weiss Research, Inc., www.moneyandmarkets.com/services/trading-services/top-stocks-under-10, issues@e.moneyandmarkets.com; 1-800-291-8545, March 13, 2017