Three reasons to invest in the Shutterstock IPO

Shutterstock may not be the most glamorous tech company vying for investor dollars, but I still think buying shares makes sense. Here are three reasons why.

While you might not be familiar with Shutterstock, you’ve probably seen their wares on the internet, book covers or posters hundreds of times. Shutterstock operates a stock photo site which lets subscribers download pictures to print or post online next to news articles, and/or as part of a Web site’s design. All told, Shutterstock has some 19 million photographs and graphics available to license for online and print use.

While the company may not be the most glamorous tech company vying for investor dollars, but I still think buying shares makes sense. Here are three reasons why:

1) The subscription model. Unlike some of its competitors, Shutterstock really pushes its subscription model. That means customers keep ponying up as much as $250 a month to use the service. Not only does a subscription model breed long-term business relationships, it’s a more reliable revenue stream than the advertising dollars that most websites compete for. The proof is in the pudding. For the year ended 2011, Shutterstock earned 21.8 million on a revenue of $120.2 million (per the company’s S1 filing).

2) Powerful growth. Revenue at Shutterstock grew 44.5 percent in 2011 – not just in the U.S. but around the world:

And the company is in an industry that’s experiencing tremendous growth. BCC Research estimated the online image marketplaces would grow 51 percent a year between 2008 and 2013 to a total of $2.0 billion in 2013. With more than 32 percent of U.S. businesses still without a web site (and millions of potential customers in countries like China), Shutterstock should be able to sustain double-digit growth for years to come.

3) Consolidation, anyone? While Getty Images dominates the stock photo industry thanks to its strong ties to newspapers, Shutterstock could give the company a run for its money by acquiring some of its competitors. Indeed, that could be exactly what Shutterstock execs have in mind.

“We may use all or a portion of the net (IPO) proceeds to acquire or invest in complementary companies, products or technologies, although we currently do not have any acquisitions or investments planned,” Shutterstock writes in its S1 filing. If it can acquire one or two key competitors, the company will be able to quickly ramp up profits – and look to establish itself as a long-term player in the stock photo business. I’d be nervous if I were Getty.

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Groupon stock forecasts for 2012: Deal or no deal?

Shares in Groupon (NASDAQ:GRPN) are looking more and more like an “easy double.” And I want to be there when that double happens.

One of the best ways to make money off “hot” tech IPOs is by ignoring them for a year or so. By then, the market will have devoured all those overly-hyped novices who eagerly bought shares during the first week of trading, then sold them when they saw the value of their holdings crumble. That’s what appears to be happening to Groupon Inc. (NASDAQ:GRPN) right now.

And it’s a pattern that gets repeated a lot. I like to use one of the stocks I lost a lot of money on as an example: E-Commerce China Dangdang Inc. (NYSE:DANG) – the so-called “Amazon of China” (even though Amazon operates in China, too). The stock had its IPO on Dec. 10, 2010. It debuted around $32 an ounce. A year later, shares were bloodied. They plunged more than 80 percent to less than $5 a share.

If you would have bought at the start of 2011, though, you’d be quite happy with your returns. Since then, DangDang has shot up nearly 70 percent from $4.40 to $7.45. I think we’re on the verge of something similar happening with Groupon.

Shares in the daily deals site are in the long, painful process of shaking out the weak hands. The question is, when will the real institutional buyers start moving in? I would argue that the tipping point could be coming soon – particularly as a number of investment firms have started moving to upgrade the stock. Here are just a handful of the Groupon stock forecasts for 2012 that we’ve seen over the past month or so:

B. Riley & Co.: Upgrade from sell to neutral. Price target of $10.60 (per Barrons).

Evercore Partners: Upgrade from to equal weight to overweight. Price target of $15 (per Forbes).

FactSet Research: Seven buy ratings and 12 hold ratings. An aggregate price target of $21.44 (per the Wall Street Journal).

Reuters: The average price target of 25 analysts covering Groupon stands at $22.53 (per Seeking Alpha).

Even after an accounting error forced Groupon to revise revenue down $14 million last quarter, it’s hard to ignore the company’s growth profile – and the stock’s subsequently low valuation.

Indeed, Groupon’s valued at “roughly half the multiple that was reportedly offered by Google in which time Groupon tripled its quarterly revenue,” writes Ken Sena, an analyst with Evercore Partners, wrote in a recent research report. It doesn’t make sense then that the company’s more than twice the size it was at the time of offer but somehow worth just half the price.

That’s got me looking for the right time to start accumulating Groupon shares. In the words of hedge fund manager James Altucher, Groupon’s an “easy double” (per Seeking Alpha). I’d like to be there when that double happens.

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3 reasons to invest in a Pinterest IPO

Now that Facebook and Twitter are maturing, it’s natural for investors to start searching for the next big thing. Here’s why Pinterest should be at the top of the list.

Now that Facebook and Twitter are maturing, it’s natural for investors to start searching for the next big thing. Pinterest is – or should be – at the top of the list. The invite-only “pinboard” site lets users create collections of photos and text to share with others. The idea has caught on, and Pinterest is growing faster than any other standalone Web site in the history of the Internet, according to comScore.

Just nine months after launching, Pinterest hit more than 10 million unique visitors a month (and the site did it in January of 2012). In March of 2012, Compete reports that the site hit 18 million visitors. It’s not just growth that has investors excited about Pinterest’s future. Here are three more reasons why a Pinterest is tantalizing:

1) Pinterest isn’t like Twitter. One of the biggest complaints about Twitter is its lack of a viable revenue model. That’s not the case with Pinterest.

“It’s so commerce and goods driven,” an investor told BusinessInsider. In essence, the site’s community is creating perfect marketing mini-sites. They save pages and pages of photos and descriptions that are tightly tied to an idea, product or piece of merchandise. Pinterest could later leverage those pages for profit through partnerships, affiliate deals and paid ad placements.

The site’s serious about finding the right revenue model, too, as it recently hired Facebook’s former director of monetization, Tim Kendall.

2) Businesses and marketers love Pinterest, too. As the site’s notoriety has grown, businesses, bloggers and marketers have started wading onto Pinterest and creating their own pinboards. Businesses can use their pinboards to channel traffic to their Web site, Facebook page or Youtube channel, and if other Pinterest users like what they see, they can pin a business’s posts to their own pinboards (drumming up even more interest in the process).

Big brands have already started building formidable followings on the site. Whole Foods, for instance, has 26,000+ followers and Nordstrom has 14,823.

Much like LinkedIn offers premium services for recruiters, Pinterest could do the same with promoted pinboards. However, they’ll have to carefully tread the line between marketing and alienating their enthusiastic fanbase.

3) Investors see Pinterest’s potential. Secondmarket is an online marketplace where wealthy investors can buy and sell stock in private companies. While Pinterest doesn’t have any shares on the exchange, yet, Secondmarket’s community of investors is clearly excited about the site. The number of “watchers” on Secondmarket (investors who want to know when they can get access to Pinterest shares) shot up 641 percent in Q4 2011. Pinterest is clearly the new darling of the VC community – even outshining exciting sites like Kickstarter:

If only we could get our hands on some shares in the start-up… That would definitely be worth pinning.

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5 reasons to invest in the Imperva IPO

Given Imperva’s geeky niche and the relatively small size of the expected proceeds ($75 million), the company’s upcoming IPO hasn’t garnered much press, but I’m still bullish.

Imperva, Inc. first announced plans for an IPO under ticker “IMPV” on the New York Stock Exchange late in June. Given the company’s geeky niche and the relatively small size of the expected proceeds ($75 million), the announcement hasn’t garnered much press. Still, I’m bullish on Imperva, and here are five reasons why:

1) The perfect niche. Imperva allows companies to outsource one of the trickiest parts of doing business in the Internet Age: keeping data safe from hackers. As hackers get more sophisticated, so too does the expertise required to keep them out. Worldwide, spending on IT security products is expected to grow 40 percent – according to an Imperva-cited study by IDC – from $27 billion last year to to $38 billion in 2014.

2) Surging revenue. Imperva’s yet to turn a profit. The company lost $12.3 million in 2009 and $12 million in 2010, but it’s not all bleak news. Revenue surged 40 percent during that same time period from $39.3 million in 2009 to $55.4 million in 2010.

Unlike a lot of high-tech companies that are struggling to define their business models, Imperva’s got a great one: it’s a subscription-based service. Once a company signs on, they’re going to keep re-upping unless a competitor lowballs Imperva on price, goes belly up or finds it needs services Imperva can no longer provide. On top of that, internet security is one of those things we like to set and forget. We’ll happily pay someone else to take care of it so long as we don’t have to think about it.

3) The law’s on their side. New regulatory requirements out of Washington have upped the ante for corporations and governmental agencies that store sensitive personal information on their servers. Compliance with those laws is cumbersome and burdensome to companies without data security expertise. Imperva specifically cites those clients as a key part of its business strategy.

4) Going after the little guy. Not content with just enterprise-level clients, Imperva launched an Israel-based company called Incapsula, which targets small- and medium-sized clients. For $50 a month, Incapsula’s customers can get firewall protection for their web apps. That’s a small price to pay for peace of mind, and – if things work out – a fair number of those small businesses will one day be enterprise-level clients with more sophisticated security needs.

5) Clients with deep pockets. Imperva doesn’t publish a full list of its clients, but the company does divulge a bit in their S-1 filing: “Our customers include four of the top five telecommunications companies, three of the top five commercial banks in the United States, three of the top five financial data service firms, three of the top five computer hardware companies, two of the top five food and drug store companies, over 150 government agencies around the world and more than 100 Fortune 1000 companies.”

In the past, Imperva has publicly acknowledged several clients including GoDaddy, Accor, Vonage and Fool.com.

A few reasons NOT to invest in the Imperva IPO

Lest we forget, all investments come with risk. Imperva has plenty. Namely: High-debt, a lack of profitability, heavyweight competitors – International Business Machines Corp. (NYSE:IBM), F5 Networks, Inc. (NASDAQ:FFIV), Citrix Systems, Inc. (NASDAQ:CTXS) and others – as well as a product that requires constant updates and monitoring as the company seeks to stay a step ahead of hackers. Still, there’s plenty of room for growth in the sector, and with every new customer Imperva attracts, it becomes a more appealing buyout target. I like the product, the niche and the prospects for this stock.

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3 reasons to buy stock in Zillow’s IPO

Zillow’s IPO looks attractive thanks to the company’s focus on social media, mobile apps and a marketing niche with very deep pockets. Here are three solid reasons to consider adding Zillow stock to your portfolio.

With a database chock full of more than 1 million houses, it’s safe to say Zillow’s close to logging data on every house in the country. As of the 2009 census, there were 129,969,653 “housing units” in the U.S. (and that figure includes apartments and mobile homes).

That depth of data has made Zillow one of the most popular Web sites on the Internet. Alexa.com ranks Zillow as the 138th most-visited Web site in the country and the 677th most-visited site in the world. It’s safe to assume that a sizable chunk of the site’s 19 million+ monthly unique visitors are in the market for a house, and that makes Zillow a real estate agent’s wet dream.

On the heels of Zillow’s IPO filing yesterday, here are three reasons to consider adding the company’s shares to your portfolio when they hit the exchange:

1) It’s a buyer’s market? Even as we slog through one of the worst housing markets in decades, revenue at Zillow jumped 74 percent last year to $30.5 million. The company’s still not profitable as it booked losses of $6.8 million last year. Still, those losses are getting smaller. In 2009, Zillow lost $12.9 million. In 2008, the damage was $21.8 million. Should the housing market recover in the next few years, Zillow should quickly vault into the green and stay there for good.

2) Bountiful traffic. Based on March’s numbers (19.4 million unique visitors online and via apps), Zillow’s traffic is on pace for year-over-year gains of more than 90 percent. In a recent post titled Should you invest in a Zillow IPO? I pointed out just how dominate the company is in the real estate listing space:

Zillow’s biggest competition for eyeballs probably comes from Craigslist.org – a free classifieds site that doesn’t even sell ads. On top of that, Craigslist seems to cater more to apartments and rentals. That makes Zillow one of the primary stepping off points for home buyers. It’s getting to the point where it will soon be indispensable to Realtors – if it isn’t there already.

3) Zesty acquisitions. Five weeks ago, Zillow announced that it had acquired Postlets.com. Postlets helps sellers post their properties and rentals on 13 popular classified and social networking sites including Craigslist and Facebook.

Postlet’s had more than 500,000 users as of January 2010, and the site offers a freemium model that could drive up Zillow’s number of paying subscribers. Founded in 2005, Postlets quickly became the de facto tool for agents, property managers and landlords looking for free ways to promote their listings. Expect more acquisitions down the pike as Zillow looks to solidify it’s spot as the Web’s No. 1 real estate listing site.

Despite the company’s promising trends, some investors are scratching their heads about the timing of the IPO.

“There had been a lot of people who were hoping that Zillow, at some point, would go public,” Scott Sweet, senior managing partner of IPOBoutique.com, tells ABC News. “It is not a particularly good time right now.”

Fred’s Best Guess: If you’ve never spent time on Zillow looking up how valuable the homes of your friends and family are, I’d be willing to bet you’ll be just that bored sometime in the future. The verb “Zillowing” will never have the cachet of “Googling” someone, but it’s undeniable that Zillow’s quickly become a leader in the online real estate listing business. The company’s got experienced leadership, too, in CEO Spencer Rascoff who helped Hotwire.com grow itself into a $675 million acquisition in 2003. Expect Rascoff to continue making smart acquisitions that focus on social media. That should help Zillow stay ahead of its competition and continue pulling in ever-larger piles of cash.

Zillow might not be as sexy as a RenRen.com, but it targets a niche with very deep wallets. I expect the company to become profitable quickly and to continue growing rapidly for several years. Couple that with a housing recovery in the next few years, and you’re probably looking at some phenomenal growth rates. All that said, I just don’t see shares in Zillow rising in a straight line – particularly since it may take three or four quarters for the company to turn a profit. Give it three to six months to sell-off after its IPO and buy.

Note: Fred’s Best Guess is just that: a complete guess. It does NOT constitute investment advice and should NEVER be construed as such.

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LinkedIn IPO just got sweeter

As the LinkedIn IPO approaches, the company appears to be trying to re-brand itself as something more than a glorified networking hub for the unemployed, and that’s good news.

Linkedin.com – a social networking site for professionals – is trying to sweeten the pot before the company’s IPO by adding a social news function to the site. Dubbed LinkedIn Today, the news aggregating service works by pulling in links to articles and blog posts a user’s connections have shared. The theory goes that the news your business associates are reading is probably the same sort of news you’re interested in reading, too.

The gambit is well-timed to boost traffic to a site that’s already the 12th most-visited site in the U.S. (per Alexa). More traffic = more advertising revenue and that should help drive up investor interest before the company’s IPO.

[Related: 3 reasons to buy LinkedIn shares during IPO]

As of the end of 2010, LinkedIn had more than 90 million registered users and attracted about 65 million unique users to its site each month. Facebook, by comparison, has more than 500 million users, and Twitter claims 190 million. If LinkedIn Today catches on, it could significantly drive up pageviews and the amount of traffic the site receives.

Right now, LinkedIn Today is still in beta, and it’s not readily apparent when you log in. You’ve got to hover over “More” in the site’s nav bar and click “News” to get to it, but it’s easy to envision that the feature could get integrated with the site’s landing page when users log in. If the feature gets more prominent play on the site, it very well could give professionals a reason to return more frequently.

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LinkedIn itself warned that a “substantial majority” of its members don’t visit the site on a monthly basis in its IPO filing. That means there are a lot of dormant LinkedIn profiles out there. After all, the site’s appeal is strongest for job-seekers, and the happily employed have little reason to spend time networking on Facebook, Twitter AND LinkedIn. Still, LinkedIn appears to be trying to re-brand itself as something more than a glorified networking hub for the unemployed.

In unveiling the new feature (and a number of other tools), Jeff Weiner, LinkedIn’s CEO, said he wants the site to become users’ “professional profile of record” – one that helps people who are hunting for jobs and helps people perform their existing jobs.

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Time to buy Apple (NASDAQ:AAPL)?

If Apple (AAPL) addresses its iPhone 4 problems, it might be a good time to buy the company’s stocks before their earnings report next week.

One of my favorite trading techniques is to buy a volatile stock a few days before the company’s earnings report, then sell it before that company actually reports. Traders generally like to speculate that a specific stock will beat analysts estimates, and that can push prices higher. Still, no one – not even professional analysts – know exactly how a company is going to perform in a given quarter.

Apple, Inc. (NASDAQ:AAPL) is due to report their earnings after the stock market close on Tuesday July 20, 2010, and they’re one of the exceptions to the “I-don’t-know-if-they’re-going-to-beat-estimates” rule. Apple always seems to beat estimates. In fact, they’ve done it for the past 29 quarters in a row since April of 2003! The release of the iPhone 4 and ongoing iPad sales will definitely help bolster their earnings, too. All’s rosy, right?

Not really, Apple’s stock is down 6 percent over the past month. There’s a dark cloud hanging over the company’s head with the release of a Consumer Reports blog post that cites an antennae “design flaw” in the phone. The magazine recommends consumers avoid the new iPhone due to reception problems when users cover the devices lower left corner with their hand.

Now, there are grumblings of a recall that could cost the company $1.5 billion. I’m not so sure it would cost Apple that much; particularly since a cover for the phone eliminates the reception problem, but it’s clear that the markets have been punishing the company.

In effect, I believe they’re pricing in the cost of a recall. That means that when the news hits, the stock probably won’t drop as far as a casual investor might believe. In fact, I argue that the stock will shoot up when Apple finally decides to answer for themselves — particularly if they offer a low-cost solution to the problem BEFORE they release their earnings report next week. If past performance is any indication of future results (haha), Apple WILL beat analyst earnings this quarter especially since their phone came out on June 24 and some sales should be reflected in the upcoming report. That’ll be good news for investors who buy this dip.

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