RetailMeNot (SALE) : 1-year performance

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RetailMeNot (SALE) : looks like a buy

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update 12/14: SALE went up for another 10 days after we bought it

RetailMeNot (SALE) reported earnings Monday 4 August 2014

  

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RetailMeNot (SALE) said its second-quarter profit fell 16% as the online-coupon company reported a 49% rise in expenses that masked revenue growth.

The company attributed the profit decline to its increased investment in product development and sales and marketing, along with higher stock-based compensation expense.

Shares fell 21% to $20.10 in recent after-hours trading.

The company aggregates digital coupons from retailers and makes them available on its website and smartphone application, collecting a commission from the retailer after a shopper makes a purchase with one of the digital coupons.

Unlike companies that offer daily deals such as Groupon Inc. (GRPN), RetailMeNot's coupons can only be used online.

RetailMeNot went public a year ago and surged on its first day of trading. The stock peaked in February at $48.73 but has declined since then on concerns about its search-engine optimization visibility. When Google began rolling out the latest update to its algorithm in May, initial reports suggested RetailMeNot was among the biggest losers. Its stock closed Monday at $25.30.

For the latest period, RetailMeNot reported a profit of $4.3 million, down from $5.1 million a year earlier. On a per-share basis, which reflects preferred dividend impacts in the year-earlier period, the company reported a profit of eight cents, compared with a loss of 68 cents a year earlier.

Revenue rose 37% to $59.5 million, while mobile revenue more than doubled to $10.7 million.

New IPOs - when to buy?

RetailMeNot (SALE) operates a digital coupon marketplace. Unlike some IPOs, the company is turning annual profits. Earnings grew from 4 cents a share in 2010 to 34 cents, 52 cents and last year 61 cents a share. The Street expects EPS to pop 77% to $1.08 a share this year on 29% sales growth.

The stock cleared a 39.60 buy point in a cup base on Feb. 10. Volume was 244% above average. By Feb. 27, the stock rose as much as 23% above the buy point. When a stock rises 20% above the buy point in three weeks or less, it triggers the eight-week hold rule. However, the same day it hit the 20% level it reversed lower and closed low in the day's range.
What is an investor to make of that?

The next day RetailMeNot plunged more than 15% intraday. The hold rule was superseded by another rule: Don't let a winner cycle into a loss. So a disciplined investor should have been out of the stock with a small profit.

On Monday, the stock plunged further but rebounded in strong volume after a descent near the 10-week moving average. Arguably this could be regarded as establishing a new buy zone. The weekly volume on last week's decline was strong, but not nearly as strong as the volume in the two weeks ended Feb. 7 and 14, when it broke out.

Can an investor buy now off the 10-week line? Yes, but the conventional buy zone up to the previous high of 48.73 appears to be a stretch. Getting in well below that level would be prudent.

Flash sale retailer Zulily (ZU) turned profitable in 2013. A December breakout from an IPO base at 41.42 failed in January, triggering the 8% sell rule.

The stock then worked on a double-bottom base. The pattern actually turned into a shakeout + 3 with a 40.14 buy point (the first low at 37.14 plus 3 points). Volume — often a hard read on an IPO — appeared soft on the breakout.

Thanks to a post-breakout gap up, the stock is far extended.

What to do now? Watch for a new entry, perhaps a three-weeks-tight or short stroke or even a new base. Sideways action that shapes a flat base would be ideal. But if no new entry develops, investors must do their fishing elsewhere.

Zulily sets IPO range at $16 to $18

Zulily, the online women’s and children’s accoutrements website, said Friday it expects to price shares in its initial public offering at $16 to $18, which would value the company at up $2.2 billion.

By contrast, coupon purveyor RetailMeNot (SALE) and e-commerce advisor ChannelAdvisor (ECOM), which both went public this year, boast market capitalizations of $1.7 billion and about $757.1 million.

At $18 a share, the Seattle retailer would raise roughly $115 million.

Zulily offers clothing and accessories at discount prices for short periods, known as flash sales, a model used by sites such as Gilt Groupe. By carving out a niche, it has avoided competing directly with e-commerce giant and crosstown rival Amazon.com (AMZN).

Zulily has been growing rapidly. Its revenue in the first nine months of the year more than doubled, to $438.7 million, and the company reported a narrow $155,000 profit, according to a filing Friday. By contrast, Twitter, which has the year’s most hotly anticipated IPO, had $422.2 million in sales and lost $133.9 million over the same period.

A Zulily spokeswoman declined to comment.

Mark Vadon, a co-founder of both Zulily and jewelry website Blue Nile, is the single largest shareholder with a 30.3% stake, which could be worth as much as $640 million at the $18 price. Chief Executive Darrell Cavens holds a 20.9% stake that could be worth up to $449 million, based on the filing.

Venture capital firm Maveron, co-founded by Starbucks CEO Howard Schultz, holds the second-largest stake in Zulily, at 23.5%. The Seattle firm disclosed it plans to sell 2.63 million shares, or about 9.6% of its stake, potentially bringing it $47.3 million.

Investors August Capital and Andreessen Horowitz plan to sell about 800,000 shares each, or roughly 10% of their stakes.