Constant Contact Will Regain $24 on Customer Growth and Ave. Spend

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Constant Contact's ( CTCT ) recently posted better than came in better than expected; however the stock has crashed almost 20% because its Q3 guidance figures were well below expectations. Given the steady growth in the customer user base and growing ARPU, we believe that Constant Contact has been oversold. Constant Contact is primarily a provider of on demand email marketing, event marketing and online survey tools for its customers that competes with players like Eventbrite, iContact and Surveymonkey, as well as with Salesforce.com ( CRM ) and Microsoft ( MSFT ) in the customer relationship management market. It has also launched social media marketing services recently.

We currently have a Trefis price estimate of $24 for CTCT , which implies a 40% upside to the current stock price.


Steady Growth in User Base

Constant Contact has been expanding its range of offerings over the last few quarters. It has added a lot of features to its social media marketing offering, and also launched an event marketing app on the iPhone and Android platforms. All these additions have helped it attract new customers at a steady pace, as well as retain its existing customers. It added over 45,000 new users in the last quarter which brings its total tally to 470,000 unique paying customers. We expect its total user base to reach almost 800,000 by the end of the forecast period.

It also has greater cross selling opportunities, thanks to its almost complete package for online marketing through email and social media. It managed to increase the number of products per customer to 1.73, which should keep rising as it expands its online marketing offerings.

Rising Spend per Customer

Constant Contact had an ARPU (average revenue per user) of $37.86 last quarter, which we expect to reach $40 by the end of the forecast period. Higher ARPU numbers, combined with a growing user base will lead to a significant growth in revenues over the years. If Constant Contact adds even more products to its offerings, it may even manage to beat our $40 ARPU estimate, and bring in additional revenue.

Check out our complete price analysis for Constant Contact .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: CRM , CTCT , IBM , MSFT

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