February 27, 2012 PSW Staff |
consumers research and purchase new and used cars. Autobytel.com, along with at least seven other websites it owns, also helps every major automobile manufacturer market its brand online, and helps thousands of dealers connect with motivated buyers. The company generates 95% of its revenue from online purchase request referrals it sells to dealers and manufacturers. Purchase requests are from consumers seeking information or quotes regarding pricing and availability of new or used vehicles or for vehicle financing. The rest of the company's revenue comes from advertising. Obviously, Autobytel's livelihood depends almost wholly on the strength of domestic and imported vehicle sales in North America. With a declining car market for much of the past decade, Autobytel has not seen profitability since 2004. At the beginning of this month, however, the company announced that it will see its first profitable year since then, and will be releasing fourth quarter and year end results on March 1. For the first nine months of 2011, it lost a penny per share in the first quarter, broke even in the second, and earned a penny per share in the third quarter bringing it to break even. This means that even a penny, which is what is expected for the fourth quarter will bring it into profitability on the year. Four major analysts cover the stock, and for all of 2011, they have been playing catch up, forecasting a three cent loss in the first quarter, a one cent loss in the second, and break even in the third. Within the last week or two, first quarter earnings forecasts for 2012 have been bumped up from 1 cent to 2 cents, and full year 2012 results are expected to be 9 cents, up from 7 cents. This gives the stock a forward P/E just above 10, and with 25% earnings growth expected for the next five years, an effective PEG of around 0.4. Revenues seem to have hit rock bottom in the third quarter of 2010 at $12.9 million. Sales have been climbing since then and hit $16.3 million in the most recently reported quarter. Revenues are expected to be just under $16 million for the fourth quarter of 2011, and just over $17 million for the fist quarter of this year. 2011 full year revenues are expected to be $63.2 million, and $73.6 million in 2012. The company has around 47 million fully diluted shares out, meaning it needs to earn close to a $1 million in one quarter to hit 2 cents per share. Net income, which broke into positive territory in the middle of last year, was $200,000 in the second quarter, and $450,000 in the third. Detroit has had an exceptional 2011, and looks to do even better in 2012. Car and truck sales in the U.S. were at 12.8 million in 2011, and are now expected to be more than 14 million in 2012. Many believe sales could hit and sustain a level near 16 million beyond 2012. Sales are climbing so fast, in fact, that manufactures are just barely keeping up. Car makers are adding shifts and hiring thousands of workers throughout the country. 38,000 jobs were added last year, and at least another 13,000 are expected to be added this year. An inability to keep up with rising sales may hinder Detroit's profits a tiny bit, but higher prices coupled with high demand could actually help Autobytel immensely. A big sign that slightly higher prices will not hamper demand comes from the historically high average age of cars on the road. This has been due to a bad economy, and an improving one along with a huge replacement need may be the perfect storm going forward. The majority of gains in car sales last year came from Detroit’s big three. Premium imports like Mercedes and BMW were up a whopping 32% and the only softness came from imports as a whole, where Asian manufacturers were basically flat. The earth quack in Japan and flooding in Thailand were partly to blame, and most expect imports to begin rising once again in 2012. Autobytel's stock is hovering right around a dollar, a dangerous level for listed securities. It has climbed from around $0.70 at the beginning of this year. Volume is not anything special for this stock, although it has started to become more consistent this year. Back in 2004, the last time it was profitable, the stock traded as high as the mid teens. It had earned 17 cents per share in 2003, and 14 cents per share in 2004 when it had around 5 million less shares out and revenue had peaked at $160 million. Currently, ABTL has $9.2 million in cash, and $5 million in debt. The company recently announced a share buy back plan, and as of the end of January, only 0.1% of the float was sold short. Management has also started rolling out some revamping of their websites, and are going with a new motto, “Your Lifetime Automotive Advisor.” Earnings are due out Thursday of this week, and given the strength in the U.S. auto market, and the fact that this is a relatively well known name but not a very well known stock, traders may soon find out just how much horsepower is under this company's hood. |
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