Buy • Price 9.48 on June 7
by B. Riley & Co.
With a stranglehold on wedding-related media, KNOT is a premium property on the Internet. But operational and execution missteps have hampered growth. We now believe the company has matured... and has strong operational leadership, which bodes well for cohesive execution and should help it achieve a larger market share of wedding-related media and commerce over the next few years. Additionally, the Chinese venture is a drag on estimates, but could attain high valuation once revenue generation begins or a local partnership is announced.... Advertising business has started to gain traction, driving growth in 2011.... Adjusted Ebitda for 2011 increases from $16.4 million to $16.7 million, and for 2012 from $22.7 million to $24 million. Our new price target is 12, up from 11. We arrive at our price target based on the average of two valuation methods: EV/adjusted Ebitda multiple; and FCF/DCF [free cash flow/discounted cash flow]. Market cap: $309.1 million.
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