My take on RUBI

After reading the entire transcript of the talk, they are pretty clear on what the problem is: What they are saying is that the quarter as a whole was good, and mobile and video and Orders (their three new and fast growing areas of the future) are growing fast as expected, BUT their cash cow, desktop ads, are slowing down progressively, partly because of the shift to mobile, but especially because they acknowledge that they miscalculated how fast header ads would come in, and they are experiencing leakage of ads to other companies with header platforms. (A header ad never even gets to their exchange). They are rectifying the problem, and have their own header ad platform, but they realize they were slow in getting it out in the field. they are doing a full court press and believe they will have it all solved by the end of the year.

Positive spin: It could be that this is another overly conservative estimate (almost certainly true, based on their past) and they will do better than they forecast.

Negative spin: Maybe they won’t get it all out there as fast as they think. Maybe their business will suffer from header ads long term. Maybe Facebook and Google will eat their lunch, irrespective of the header problem.

I don’t know the answer but I decreased my smallish position by roughly a third and will watch what happens.



I wasnt’t invested in RUBI before, but I like buying on large dips of companies that are likely to pull thru (PN, BOFI, SWKS) and sold a winner that has flat lined and purchased a 5% position this morning. As I see it, the real deltas are as follows:

Per Benzinga (I have limited time)
Rubicon Reports
Q2 EPS $0.17 vs. Est. $0.10, 70% OVER estimates
Rev. $70.5M vs. Est. $63M, 12% OVER estimates

Rubicon Sees
Q3 Rev. $64-70M vs. Est. $70M, 0 to 10% lower
Q3 EPS $0.07-$0.09 vs. Est. $0.12, 25 to 42% lower
FY16 Rev. $275-$305M vs. Est. $295M, 7% down to 3% UP
FY16 EPS $0.75-$0.85 vs. Est. $0.90, 17% to 6% lower

For a company that has consistently reported conservatively, I hardly think a 33% drop in price is warranted from these numbers. Time will tell.

And yes - seeing that Saul sold some when I bought some has given me pause, but I think the worst has already happened and large reactions further down are less likely to occur tomorrow than they were yesterday.


And yes - seeing that Saul sold some when I bought some has given me pause, but I think the worst has already happened and large reactions further down are less likely to occur tomorrow than they were yesterday.

Hi F1Fun, You are very likely correct. They are very cheap, and they are undoubtedly underestimating where they think they will be, and lightening my position may not have been the best thing to do (although every thing I bought yesterday morning with the cash I liberated finished up). Last quarter, when they dropped 25% after earnings and a low guidance, I added and thought it was silly and bought more. When it happened again this quarter, the second quarter in a row, and they explained why they were reducing estimates, it wasn’t just low guidance and I figured that maybe the people selling a quarter ago knew something I didn’t know. And maybe there was a reason the price never really bounced back. To get 2016 earnings down to where they are estimating we will see some large drops in earnings the next quarters. And the issue is whether there is something fundamentally changed: Ad blockers? Facebook and Google? More competition that they hadn’t had before? Header ads, that will permanently detract from their exchanges, being rapidly adopted? A decline in growth rate of online ads? I don’t know, and reduced my position size accordingly. I felt I had other choices where there weren’t so many rocks in the path, and where the path to success for the company was clearer. (This stock could be a success though without the company being a big success, with just a little stabilization it would probably rise from here). Hope this helps explain it.



And F1Fun, thanks for your post. Responding to it helped me organize my thoughts about RUBI.

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Please accept the following comment with the humor of which it was intended:

Yesterday, I too decreased my position by a third.


Saul - I think the board is best when contrarian views on a company or a trade are discussed. Odds are you are probably correct. Based on this short back and forth I’m sure I’ll sell a bit quicker with a modest increase vice waiting for a full comeback.


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PenguinCafe - Probably best not to pun, but to clarify, as even I had to read that twice: With a 33% drop (which as you said everyone did) and then a sale of 1/3 of the position, the remaining value of the stock still being held would be only 44% from the previous day’s value. This is why diversification is so important. We never know what the next day will bring.