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
.