Barrington Downgrades Fluent After Earnings Miss, Stock Drop

Fluent Inc (NASDAQ: FLNT) fell short of top- and bottom-line third-quarter estimates. Some suspect the missed metrics herald longer-term underperformance.

The Rating

Barrington Research analysts James Goss and Patrick Sholl downgraded Fluent to Market Perform but maintained a $5 price target.

The Thesis

The decline in revenue compounded an increase in traffic acquisition costs. Together, the factors depressed margins.

“The expansion into different media channels, while potentially beneficial in the long term, is placing additional pressures on margins and increased caution on media spend,” the analysts wrote in a note. Consequently, management cut its 2019 revenue guidance to signal accelerated decline.

Despite the top-line struggles, Barrington is enthused by Fluent’s efforts to expand its consumer data, which improves its ability to tailor marketing. “First party data provides flexibility and multiple forms of monetization,” the analysts wrote, noting that Fluent can both sell the data and use it to inform third-party marketing services.

Data won’t necessarily salvage the profit margins, though.

“Unfortunately, Fluent has been in a transitional state that has involved creation of appropriate verticals for targeting calculated business bets, not all of which have worked out as planned,” the analysts wrote. “...Given these curtailed expectations and lack of visibility as to the timing of a turnaround and the specifics of future business plans, we feel it is appropriate to cut our investment rating to market perform.”

Price Action

At time of publication, shares traded down 36% at $1.61.

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