A "DIET" from Wyatt
02/27/2004 12:00 am EST
Ian Wyatt, editor of The Growth Report, has a knack for finding unusual growth plays, particularly in the Internet sector. One such pick is e-Diets, which offers online diet programs to over 200,000 subscribers. Here's his update on this stock, which has just moved to the NASDAQ.
"The dieting craze continues to boost e-Diets.com (DIET NASDAQ). The company has developed a system that allows members to enter personal information online (such as height, weight, exercise routine, weight-loss goals, etc.) and then the company recommends a diet plan. Subscribers pay a $5 a month membership fee. The company offers in-house plans, and plans designed around the Atkins diet, the Zone, and the Jenny Craig alternative plans. In addition, the company recently announced that it is expanding its dietary plan offerings with Slim-Fast Foods.
"The shares recently hit a new 52-week high after it announced both strong revenue growth for the fourth quarter and the company's listing on the NASDAQ Small-Cap Market. For the fourth quarter, eDiets.com reported that revenues grew by 48% to $10.8 million, while the company reported net income of $1.1 million or $0.06 per diluted share versus $100,000 or $0.01 per diluted share in the year ago quarter. Full year results were nearly as impressive, with revenues growing by 29% to $38.3 million. On the earnings front, the company lost $1.7 million or $0.10 per share, versus a loss of $1.6 million or $0.09 per share. For the full year, eDiets.com generated $2.9 million in cash flow from operations compared with $2.7 million in 2002.
"The company credits faster growth to the addition of new branded meal plans, plus increasing average revenue per subscriber. During the quarter, eDiets.com sold 81,000 new subscriptions, an increase of 10% over the corresponding period. As of December 31, the total number of paying subscribers was 189,000 versus 180,000 a year ago, and 210,000 at September 30, 2003. Looking forward to 2004, management expects revenues to increase by at least 50%, which translates into a minimum $57.5 million. For the first quarter, the company provided guidance calling for revenue of $12-$13 million, an increase of 64%-78%.
"We are pleased with eDiets.com results for the fourth quarter and year end. We believe in 2004 eDiets.com will transform itself back into a profitable company on a full year basis and look forward to being along for the ride. Shares have come pretty far as of late, however, we believe there remains upside potential from current levels. With the company's move to the Nasdaq this coming week, we believe we will see increased interest in the company from institutional investors looking for high growth companies such as eDiets.com. With the firm on the cusp of profitability, we feel the future remains bright. We maintain a Buy rating on eDiets.com, while we have increased our 12-month share price target to $13."