A stealth derivative play on Apple
Investors have overlooked this prescient mobile-focused name.
Everybody loves playing the derivatives for the new Apple (AAPL) iPhone, and my take is that you are too late for almost all of them, as they have roared into the launch.
Except for one. It's a stealth play called Millennial Media (MM), a nifty little company that just went public. I spoke with CEO Paul Palmieri on Mad Money on Wednesday night. Millennial helps advertisers reach people through mobile devices on the Web.
We hear a lot about the monetization difficulties on mobile compared with on, say, desktops. However, I am beginning to think it is more of an opportunity -- just an opportunity that's been blown by many companies so far, including Facebook (FB), because they didn't see it coming.
Millennial sure did. It deals only in mobile. It's up against Google (GOOG), which is the biggest player, and Apple, which also has an advertising-service business -- except this is one of those rare situations in which a company you may not have heard of, Millennial, is actually beating Apple. The major reason for this is that Apple's ad system, unlike Millennial's, does not support the Droid -- and the Droid is the biggest smartphone product there is.
Meanwhile, Millennial supports everyone's system -- and the bigger, better and higher resolution a smartphone is, the more money it will get for ads. So it is a pretty terrific derivative play.
Why is mobile not problematic for Millennial? The new cellphones enable advertisers to communicate through video, and mobile video is one of the most successful forms of advertising there is. Advertisers are paying more money for mobile video than they are for desktop banners, and the adoption is just occurring.
I believe that, with the trends going as they are, it will be difficult for Millennial to stay independent. It's a wonder that at $1 billion in market capitalization and 75% revenue growth, this company hasn't been picked off already -- especially considering how so many others are struggling with mobile monetization.
So why is it languishing at the level it occupied when it went public? First, we know the misery that social and mobile Internet stocks have visited on shareholders. Second, 64 million shares will be freed from a lock-up on Sept. 25. Given that there are only 73 million shares outstanding, you know people have to be worried about this, potentially the mother of all expirations.
This could turn out to be a Yelp (YELP) type of situation, in which so many shorts were put on ahead of expiration that the stock ran when there wasn't enough supply for the shorts to cover on.
You also can't presume, given how well the company has executed and how it should be nicely profitable next year, that the stock will be dumped by all of the venture capitalists in the deal.
Nevertheless, it is sure worth doing the work, because all of the growth trends are going Millennial's way, and you have to believe one of the major online players would like a stake in the mobile ad server and support game. They sure can't buy the No. 1 and No. 3 players -- respectively, Google and Apple. But to snap up the No. 2 player -- now, that makes all of the sense in the world.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long AAPL.
More from TheStreet.com
i always look forward to cramers advice.....
VoxPopulae, Cramer opinions aside what an ignorant comment! This Start-up CEO like GOOG's/ MSFT's and AAPL's and thousands of others after that was compensated mainly in shares rather than cash while incubating this company. His compensation structure remains the same as in any entrpreneurial situation. He was allowed compensation when the stock went public and he merely sold at market levels. Blame the market for buying the IPO and not slamming it like they did with FB! You must be an Obama loving demagogue who rallies against success stories. Alternatively you are a competitor.
This CEO is ahead of the curve on mobile advertising and still is the largest individual holder of this company at 8.75% just after all of the Vc's that will undoubtedly hold onto their shares. Go crawl back to your $100k desk job at your West Coast Liberal Blog!
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
In the never-ending contest for sales, American carmakers are pulling ahead.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.