Motley Fool Article . . . from today.
Motley Fool
InfoSpace Oddity
Friday May 2, 8:20 am ET
By Rick Aristotle Munarriz
InfoSpace (Nasdaq: INSP - News), no one can hear you scream. There's a lot of bad news coming out of the InfoSpace camp these days. Layoffs. Divestitures. An embarrassing situation where the company is actually suing its founder and former CEO for starting a competing business while he was still sitting on the InfoSpace board.
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Bad stuff, indeed. But don't wake the shareholders. They have seen the stock more than triple over the past nine months. Why? It hasn't been the company's operating performance, that's for sure. No, it all boils down to its balance sheet.
Its debt-free financials include a whopping $283.9 million, which breaks down to a little more than $9.20 a share in cash. Why was this stock trading for less than four bucks a stub back in September? Well, the company had just come off a 1-for-10 reverse stock split.
As our own Tom Jacobs pointed out last month, reverse splits are often the kiss of death in the equity pool. InfoSpace was off to a poor start post-split with its stock closing at $3.79 a share two days after the mid-September transaction.
But was it really going away? As long as the corporate bleeding was contained and the scandals weren't of the tainted books variety, that $9.20 mattress looked awfully firm for a forgotten stock.
So, the stock has been gradually inching higher based more on logic than on fundamental inertia. Last night's first-quarter report saw a meager deficit posted on a 10% uptick in revenue. While the company also warned of sequential weakness in the current quarter, some of that will be attributable to its exiting non-core operations. The streamlined InfoSpace will focus on three segments: Internet search and directory, Authorize.net payment gateway, and wireless. The shedding will be minor as these three divisions accounted for nearly 90% of last quarter's revenue.
With the stock now perched above its cash balance, let's evaluate InfoSpace on its own merits. Its fastest-growing business has been Authorize.net. Just as eBay (Nasdaq: EBAY - News) discovered when it acquired PayPal, there is money to be made in facilitating online payments. InfoSpace targets merchants more than the consumer sweet spot that PayPal has cornered (although PayPal is definitely a force there, too).
With its search revenues also growing, it's time to start looking at InfoSpace as more than just a penny stock survivor who beat the odds of the reverse split graveyard. It may take time before Wall Street catches on -- and the current quarter's backtracking isn't going to help in the near term -- but at least the downside appears limited for now.
Hey Levy, were you Boris The Drunk on Yahoo a few years ago? |
