Roth Analysts Prefer Other SaaS Stocks Instead Of Constant Contact; Cut Rating

• Constant Contact Inc CTCT shares have gained 28 percent in the last one month, jumping from below $26 to around $32 on November 2.
• Roth Capital Partners’ Richard K. Baldry downgraded the rating on the company from Buy to Neutral, while reducing the price target from $38 to $32.
• The company’s shares surged after the agreement to be acquired by Endurance International Group Hldgs Inc EIGI and the new price target reflects the agreed upon consideration, Baldry said.

Constant Contact announced on November 2 that it has agreed to be acquired by Endurance International in an all-cash transaction. The boards of both the companies have agreed to a price of $32 per share. Analyst Richard Baldry mentioned that there is “little likelihood” of Constant Contact receiving a competing bid.

The deal values Constant Contact at a premium of roughly 23 percent to its closing price prior to the deal's announcement. “Given CTCT's slowed growth rate near-term, we view the offer as fair overall and see the peer comparable discount as reflective of the ongoing demand challenges in CTCT's targeted SMB market segment,” Baldry wrote.

The deal is likely to go through since both the boards having agreed to it and Endurance International has lined up $1.085 billion in fully committed debt financing.

Baldry said that other turnaround or value-oriented SaaS names appear to be more attractive than Constant Contact. This includes companies like LivePerson, Inc. LPSN, Interactive Intelligence Group Inc ININ and Tangoe Inc TNGO, all three of which have a Buy rating from Roth Capital Partners.