Deutsche Bank Maintains Buy on comScore

The high reoccurring revenue base (72%) makes comScore an attractive play but consolidation/dislocation at several customers are likely to be a drag on the stock for sometime. I actually think this is somewhat of a software play and fits into my thesis as software as a safe haven.


From Analyst Jeetil Patel:
Revenue Visibility Still Deserves a Premium - BUY

We maintain our BUY rating on comScore as we believe the company's
subscription-based model offers visibility and defensibility in an
otherwise uncertain economic environment. While 1Q expectations have
been tempered, mostly on EBITDA, we note growth for '09 looks solid
(>15%) and visibility into revs is high. Nonetheless, we view any
share price weakness as a buying opportunity on this growth play on
Internet/advertising. EBITDA margins should also expand still in
2009, helping to drive *20% profit growth in 2009.

Client base still growing in 2009 – Cross-selling of new products
working

With 4Q results largely in line with expectations, net customer adds
of 30 was lower than 40-50 net adds average, after posting net adds
of 32 last quarter. There is some slowing at comScore, as the
company faces economic headwinds and some marketing campaign
freezes. However, total customers now stand at 1,166, with renewal
rates still exceeding 90%. Additionally, its recurring revenue
element (72% of 2009 revenue) offer investors visibility in an
uncertain economic backdrop. In fact, 30% of its subscription
revenues are still under multi-year contract, which offers some
longer term visibility beyond 2009. As for 4Q results, revenues/EPS
of $31.6mn/$0.18 came in slightly below DB at $33mn/$0.17.

Adjusting Estimates

We now expect 1Q09 revenues/EBITDA of $30.6mn/$4.3mn vs. $30.5mn/
$5.6mn previously, implying a 24%Y/Y growth in subscription-
revenues. Our 1Q pro-forma EPS estimate is now at $0.08 vs. $0.15
previously .For 2009, we now expect revenues/EBITDA of $134.8mn/
$28.8mn vs. $141mn/$34.2mn previously. Our FY09 pro-forma EPS is now
$0.70 vs. $0.95 previously.

Reducing Price Target to $15 ($19 previously)

We are lowering our price target to $15 from $19 previously based on
21x our '09 EPS estimate and 13x 2009E EBITDA. Comparable multiples
have contracted in recent months, and our price target for comScore
reflect a premium multiple to its peer group trading at an average
of 17x 2009E earnings and 6x 2009E EBITDA. We believe a higher
multiple is justified, considering that the company exhibits
significant visibility into its cash flows and its diversified base
of over 1,000+ customers across multiple verticals.. Risks include:
VC overhang, competition, panel recruitment/maintenance