(By Mani) Shares of Constant Contact, Inc.
) fell more than 33 percent in the past three months and it has likely reached a stabilizing point and hence made the current valuation attractive.
Constant Contact, which is the leading provider of on-demand email marketing solutions for small businesses and other organizations, would benefit from its strong mindshare with its customers. This would help traction with new products sales, like SinglePlatform, leading to a re-acceleration of top-line growth and margin improvements in 2013.
The company has acquired privately owned SinglePlatform for about $70 million to boost its online business. SinglePlatform gives small business a single place to update their critical business information and delivers that information across a publishing network that reaches more than 200 million consumers per month. This network includes sites like Foursquare, New York Times, YP, and UrbanSpoon.
The offering from SinglePlatform, which lets small businesses quickly distribute rich content to consumers, complements the current Constant Contact suite of online engagement marketing tools.
As part of the acquisition, Constant Contact will make it free for small businesses to create basic listings that will be delivered through SinglePlatform's publishing partners. Additionally, SinglePlatform will continue to offer its paid-for Digital Storefront product, allowing small businesses to add rich content to their listings, such as menus, products and services, photos, and pricing, to give consumers the information they need when they are making purchase decisions.
The small and medium businesses (SMBs) struggle to find time and resources to maintain an effective digital-storefront. However, more and more shoppers are searching online for services, which makes maintaining a digital-storefront crucial for success.
"SinglePlatform serves a real need for SMBs, and adding SinglePlatform's features enhances CTCT's competitive advantage," Oppenheimer analyst Brian Schwartz wrote in a note to clients.
However, the company lowered its 2012 EBITDA guidance to $35.4 million to $36.7 million, from $45.8 million to $46.9 million as a result of the acquisition. On the positive side, the deal should add $1 million and $10 million to 2012 & 2013 revenue, respectively.
The deal broadens the company's application suite and gives more scale with additional revenue. The acquisition also boosts Constant Contact's competitive advantage as the software as a service (SaaS) vendor that is closest to offering a unified-marketing-platform for SMBs.
In addition, the deal creates numerous cross-selling opportunities for the company's products into SinglePlatform's customer-base and selling SinglePlatform's services into Constant Contact customers.
As a result, the current weakness in the stock creates a buying opportunity as SinglePlatform acquisition would enhance the company's top line in the coming quarters, providing more value for investors.