The Rubicon Project, NYSE: RUBI, Stock Trades Toward IPO Base Resistance As First Quarter 2016 Earnings Approach

The Rubicon Project, Inc. (NYSE: RUBI) is slated to report its first quarter 2016 financial results on Tuesday, May 3, after the market closes. The Rubicon Project first offered 6.8 million shares at $15 on April 2, 2014, as reported by the NASDAQ.

In the weeks following the April, 2014 RUBI IPO, the stock traded as high as $23.20 before falling below $10 several times through mid-2014.

On April 7, it was reported that RUBI shares had cleared a “alternative entry” of $18.34, with a “buy zone” of $18.34 to $19.26, by Investor’s Business Daily. The all-time high of $23.20, printed in April, 2014, currently sits as the final line of resistance for the RUBI stock IPO base. The newspaper lists The Rubicon Project as the No. 1 ranked stock of its Computer Software-Enterprise group, and ranks the shares with a proprietary EPS ranking of 80 out of 99.

IBD recommends the use of stop-loss levels or orders on all stock positions as a means of managing the ever-present risk of the equity market. Institutional investors have been thought to intentionally break stocks, such as RUBI, out from IPO bases in order to create a market of smaller retail investors to sell larger positions to.

Stock in The Rubicon Project (NYSE: RUBI) is trading below IPO base resistance as its May 3 first quarter 2016 earnings date approaches. [Image via Venngage]However, each of the best-performing stocks in the history of equity markets, from Wal-Mart Stores Inc. (NYSE: WMT) to Amazon.com, Inc. (NASDAQ: AMZN), first cleared levels of IPO base resistance before going on to make their dramatic price runs.

Since coming public and first trading at $17.50, shares of The Rubicon Project have returned 6.21 percent compared with a return of 9.69 percent for the Dow Jones Industrial Average (^DJI) over the same period.

Fundamentally, The Rubicon Project is something of a enigma in the current market environment. Another no-debt firm, PayPal Holdings, Inc. (NASDAQ: PYPL), which saw its shares spun-off from eBay Inc. (NASDAQ: EBAY) in July, 2015, as reported by the Inquistr, whose shares are also approaching IPO base resistance, does not offer earnings per share growth nearly as robust as The Rubicon Project.

For the coming two quarters, the consensus among Wall Street analysts is for RUBI EPS of $0.03 and $0.10; views have been brought down from $0.04 and $0.13, 90 days ago. If met, these expectations would equate to year-over-year EPS growth of 50.0 percent for the first quarter of 2016, and 66.7 percent for the second quarter.

For the full 2016-year, analysts expect The Rubicon Project to report EPS growth of -30.6 percent. In 2017, views are for EPS growth of 37.3 percent. Over the coming five years, analysts see the advertising software company growing its EPS by an average of 26.1 percent a year.

Full year-2016 analyst EPS estimates have increased by 5.6 percent to $0.75 over the past 90 days; full year-2017 estimates have increased by 3.9 percent to $1.03 over the same period.

RUBI shares of The Rubicon Project are trading toward all-time highs as the company prepares to release first quarter 2016 earnings on May 3. [Photo by Spencer Platt/Getty Images]Analysts are calling for revenues from The Rubicon Project of $293.4 million for 2016 and $363.4 million in 2017; if met, these numbers represent year-over-year growth of 29.1 percent and 23.9 percent respectively.

The Rubicon Project carries no debt and held a cash position of $147.5 million at the end of 2015. The company reported an operating margin of -2.3 percent, a profit margin of 0.2 percent, and a return on equity of 0.2 percent.

Major institutional holders of RUBI shares include 40 North Management, who held 7.9 percent of those outstanding, valued at $62.2 million, at the end of 2015; The Bank of Montreal (NYSE: BMO); Primecap Management; Lord Abbett & Co.; and Wells Fargo & Company (NYSE: WFC).

Thirteen brokers currently publish price targets for RUBI shares. Targets range from $15 to $26 and average $21.85. The average recommendation from firms who publish buy and sell recommendations for RUBI stock is 1.7 where 1.0 is a strong buy and 5.0 is a sell; the average recommendation has remained steady over the past week.

[Photo by Spencer Platt/Getty Images]