So an investor is talking about how Netflix has quadrupled it’s stock price in the last seven Months. It’s a great story, watching Netflix on my tv through my Roku box is a fantastic experience.
Then things get weird. Investor Whitney Tilson:
If Netflix is the next Amazon, who will be the next Netflix?
It could be Spark Networks (NYSE: LOV), which owns and operates JDate and Christian Mingle.
“I said, ‘This is my next Netflix,’” said Tilson, recalling his speech at the Eighth Annual Spring Value Investing Congress. “It’s an Internet-based company with a lot of upside optionality that is sacrificing current profits and taking all of the profits from an existing cash cow business and [pouring] it into a growth opportunity.”
In that sense, Tilson said that it is “very much like Netflix.”
“But this is a much, much smaller company,” he said. “It only has about a $170 million market cap. Basically it’s two websites — they’re almost identical websites targeting two different markets. JDate targets Jewish singles who are looking to meet other Jewish singles. That business has been around for well over a decade and has had a 90 percent or higher contribution margin for the last 11 years running, but it hasn’t grown. It is the very definition of a beautiful cash cow. JDate is worth [Spark's] entire market cap.”
Then he says that Facebook could purchase Spark Networks. As if that wasn’t improbable enough, he goes on to say that IAC (owner of Match.com), Yahoo and Google are potential acquirers.
IAC, well sure, but if you look at past IAC dating site deals, Spark Networks’ financials don’t appear similar to those of companies that IAC has acquired. Go look at the financials for the full picture.
But Yahoo and Google? Yahoo outsourced it’s dating to Match years ago and Google is in the midst of a big refocus, shuttering a number of well-liked services like Google Reader.
Interesting to see long-time shareholder Great Hill Investments sell off 2.8 million shares (or 3.5M depending on what you read) of Spark Networks stock this week. Great Hill purchased 6 million shares back in 2006.