Could Millennial Media Be The Next Big Mobile Acquisition Play?

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The digital mobile advertising company Millennial Media (NYSE:MM) reported earnings on Wednesday that saw the company top analyst estimates for earnings per share, but miss on revenue, with shares plummeting over 37 percent during trading on Thursday in response. Meanwhile, investors supported the stock on Friday to help it land in the green.

The company reported that revenue increased to $72.6 million from $49.4 million a year ago, which reflects a growth of 46.9 percent. Analysts had been expecting figures closer to $75.5 million, according to analyst estimates from Business Insider. The company posted a loss of 12 cents a share versus the 5 cent loss seen in the first quarter of 2013 and the analyst expectation that the company would lose 10 cents a share. The net loss for Millennial Media was $12.9 million.

Poor guidance didn’t help the company, which predicted that its revenue for the second quarter would be between $70 million and $75 million while earnings would be a loss of between $5 million and $6 million. Business Insider said that analysts forecast the company would make $96.4 million next quarter, putting Millennial’s own predictions $20 million below what analysts were looking for.

The company’s CEO Michael Barrett is only in his first quarter as head of the company, entering a familiar world with digital and mobile advertising efforts from industry dominators Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Facebook (NASDAQ:FB) and Yahoo (YHOO). “While I would liked to have seen stronger performance in the quarter, we have developed an aggressive strategy and I have high confidence that we can execute and capitalize on the growth and promise of mobile,” Barrett said in the earnings release.

Aside from the results and the fact that the stock closed at $3.36 on Thursday afternoon, the company also announced that its CFO Michael Avon would be leaving the company “to pursue other career interests.” The lack of a CFO was also a catalyst for short-term uncertainty, but if the company plays its cards right can be a win down the road with a proven candidate for the job.

Millennial describes itself as “the leading independent mobile advertising platform company,” and Google and Facebook have consistently shown to be the dominating forces in mobile advertising. Recent data from eMarketer showed that for 2013 Facebook and Google combined accounted for 75 percent of new mobile ad spending and 66 percent of the total money spent on mobile ads. Facebook has shown the most growth in mobile advertising, with mobile now accounting for over half of the company’s total ad revenue. Facebook’s share of the mobile advertising market grew from 5.4 percent in 2012 to 17.5 percent in 2013, while Google’s share saw a slight decline from 52.6 percent to 49.3 percent.

To give some comparison, in the first quarter of the year while Millennial only made $72.6 million, Facebook reported revenue of $2.5 billion and Google reported revenue of $15.4 billion. The majority of that money for both companies comes from digital advertising, and mobile ads are growing to take up a more significant portion of that figure every quarter as people transition to mobile devices for most of their computing needs.

The two behemoths have an advantage from collecting such detailed information about the people who use their products, and a huge group of people use products from Google and Facebook in their digital lives every single day. All that personal information that flows through your Facebook profile and your Gmail account can be used by the companies to leverage targeted advertising, allowing advertisers to know a great detail about your interests and correspondingly show you advertisements for products you’re likely to be interested in.

New CEO Michael Barrett has a very successful track record. He was once CEO of a company called Admeld, which was acquired by Google for $400 million. Also, he had a brief stint as Chief Revenue Officer of Yahoo in 2012, where the company experienced a rising stock price. Will Millennial Media be another big success story for Barrett’s career? If track record is an indicator, then keep an eye out for a solid turnaround story, and potential acquisition interest from the likes of Facebook, Google or even Barrett’s former company Yahoo, as Millennial Media positions itself in a fast-growing mobile industry.

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