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All Stars: Blue Nile, MercadoLibre, WebMD

Posted on Monday, Nov 9th 2009

The National Retail Federation recently announced its projections for the coming holiday season and predicted that overall holiday sales will fall by 1% over the year. In another report, Forrester Research estimated 8% growth in online holiday sales to $44.7 billion; growth will likely come at the expense of business at traditional brick-and-mortar stores. International pick-up in e-commerce is another big trend. The upbeat outlook is reflected in the results of online retailers such as Blue Nile and MercadoLibre.

Blue Nile (NASDAQ:NILE), the luxury online retailer, reported an excellent performance. Q3 revenues rose 2% to $66.9 million and beat analysts’ expectations of $65.6 million. EPS of $0.17 grew 13% over th$0.15 earned last year and exceeded the market’s expectations of $0.16.

The company attributed its performance to growth in international sales, which grew 27.5% in the quarter to $8.8 million. On a constant currency basis, international sales grew 34.8% over the year.  Even within the domestic business, Blue Nile is gaining market share and estimates to have gathered an additional 1% share in the past three quarters to claim 4.5%-5.5% of the overall market due to the consolidation within the jewelry industry and the success of the company’s low-cost, low-inventory model.

Blue Nile recently launched its new, completely redone website. The website now boasts of a larger display area for product photos by sorting out irrelevant information. The company’s intention is to make the online experience similar to a physical shopping experience. Blue Nile also rebuilt its system to create custom engagement rings, and users can now adjust with sliding scales while watching the image of their product. The single-page shopping window is intended to simplify the user experience.

Blue Nile expects Q4 revenues of $100 million-$109 million with an EPS of $0.35-$0.39. Analysts were expecting revenues of $95.9 million with EPS of $0.33.

Earlier last week, the stock reached a new 52-week high of $67.16. It has since slipped and is trading at $61.10 with a market capitalization of $887.67 million.

The holiday cheer is spreading across to Latin America as well, with MercadoLibre (NASDAQ:MELI) recently announcing impressive Q3 results. Revenues of $50.6 million grew 26% over the year in dollar terms and beat the market’s expected revenues of $45.8 million. In local currency terms, revenues would have grown 42% over the year. EPS of $0.22 also beat the market’s expectations of $0.17.

Marketplace revenues grew 17% over the year to $37.1 million, and Payments revenue grew 58% to $13.5 million. Revenue growth was driven by positive demand for MercadoLibre’s services. Items sold on the site grew 43% over the year to $8 million. Total payments transactions grew 69% over the year to $0.9 million.

With 57% of its population aged less than 25 years, Latin America is also known as the ‘the youngest continent’. The demographics make it a rather “sophisticated, engaged and connected Internet user base,” an ideal segment for Web-based companies to prosper. Activity in the region is heating up as more and more players are realizing its significance. Recently, comScore announced the acquisition of Certifica, a provider of real-time Web measurement and digital marketing technology solutions in Latin America, a move that will help companies such as MercadoLibre track their viewership data better.

Broadband penetration at 4.9% is still below the world’s average penetration of 6.1%. But, according to a Broadband Forum survey, Latin America broadband subscriptions growth was the highest in the year at 31.4% this year. Brazil alone added 10 million users in the year and became the ninth largest broadband community in the world. All these statistics spell potential for MercadoLibre.

Their stock reached a 52-week high this week of $44.18 and is trading at $44.83 with a market capitalization of $1.98 billion.

Another online stock doing good business is the health information provider, WebMD (NASDAQ:WBMD), for which quarterly revenues grew 15% over the year to $111.6 million. EPS grew to $0.21 compared with $0.18 earned a year ago. Analysts were expecting revenues of $111.1 million with EPS of $0.19.

Public portal advertising and sponsorship revenues of $89.4 million grew 20% over the year. Private portal services revenues were relatively flat at $22.2 million compared with $22.1 million in the previous year.

The company resumed its stock buy-back program and announced its intention to acquire 5.7 million shares at a purchase price of $36 per share.

WebMD retained its leadership in the top 10 health and medical information websites within the United States with 10.2% market share in the number of visits. Monthly unique users grew 19% over the year to 59.2 million in the quarter. Total traffic grew 27% to 1.4 billion page views. During the quarter, the completed continuing medical education (CME) programs on the WebMD Professional Network grew 25% over the year to 1.6 million. The CME programs are designed to provide physicians with tools and content relevant for them to stay updated in their practice. WebMD offers more than 850 online CME activities for its physicians’ network with topics such as allergies, psychiatry, cardiology, critical care, surgery, and transplantation, to name a few.

In continuation of its initiative to expand with mobiles, the  company launched Medscape Mobile, their first mobile application for physicians, which provides comprehensive drug information, clinical reference tools, medical news, and continuing medical education on a mobile device. WebMD is developing product enhancements and additional mobile platforms including BlackBerry, proposed to be launched later this year. The application is a huge success given that within three months of its launch it has already crossed 200,000 downloads.

The company is expanding its network in other regions and markets. Through its partnership with Boots pharmacy, WebMD launched a consumer health portal in the United Kingdom. They peg the UK as a large opportunity, “with over 20% of the estimated $30 billion of annual advertising expenditures in the UK spent online.”

With over $700 million spent annually on marketing pet supplies and services in the United States, WebMD identified domestic pet-related information as another high-growth market segment. To address the segment, the company launched the WebMD Healthy Pets channel, which will provide veterinarian-reviewed health and wellness information about pets. Of WebMD’s user base, 75% already are pet owners, and they should be ready members for this channel.

WebMD could also look at acquisitions to grow their business. A potential target could be Epocrates, which is big on mobile CME . Epocrates boasts of nearly 200,000 physicians and 500,000 health care professionals who use their mobile and Web-based programs. Last year, Epocrates pulled in revenues of $65 million, and part of WebMD’s cash balance of $275 million could be put to good use in the buy-out.

Meanwhile, WebMD retained revenue outlook of $430 million to $440 million for the year with EPS of $0.22 to $0.27. Analysts were looking for revenues of $428.6 million with EPS of $0.61.

The stock is trading at $35.90 with a market capitalization of $2.1 billion. It reached a 52-week high of $36.39 last week.

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