Yellow Pages Ltd.’s announcement that it’s acquiring Juice Mobile for $35 million served weight reduction fuel for that stock, which has already risen more than 25 percent this year.
Investors were also probably very happy to hear the company’s suggestion the offer won’t affect having the ability to repay about $100 million of debt in 2016, and speak to book reiterated its goal being free from debt by 2018.
TD Securities analyst Bentley Cross applauded adding Juice, telling clients it has to supply the company’s Mediative division with additional clout and scale, together with possible synergies while using the core company afterwards.
“Unfortunately, this benefit will come in the expense of dilution,” Cross said, noting that Juice only offers a modest EBITDA contribution.
He noted that Juice generates revenues by connecting advertisers and publishers via a direct programmed solution, plus a real-time bidding platform. By becoming a middle-man, Juice requires a share of each exchange involving the publishers and advertisers.
In anticipation of Juice’s strong growth continuing, the analyst raised his price target on Phonebook to $24 from $22. However, he downgraded the stock to hold from buy on valuation.
“Our downgrade doesn’t reflect any alternation in our fundamental outlook, and it is entirely predicated on the recent stock price appreciation,” Cross said. “Management is constantly make progress toward its objective of giving back the company to growth by 2018, but due to the uphill battle, we want a substantial margin of safety to recommend buying Phonebook shares.”
