XO Group is Making More Money in 2018 on Couples and Their Wedding Guests


The article was written by Amber Zhou, a Financial Analyst at I Know First.


XOXO Stock Forecast

“Where there is love there is life.”
– Mahatma Gandhi

       (Source: Pixabay)


  • Broke into a New 52-Week High
  • Exciting operating momentum in 2018
  • Continued shifts towards growth businesses
  • Current I Know First Algorithm Bullish Forecast for XOXO

XO Group Inc. (NYSE: XOXO), a media and technology company headquartered in New York City, provides multiplatform media services to the wedding, pregnancy and parenting, and local entertainment markets in the United States. It operates a network of Websites that offer content and services tailored to the engaged, newly married, and pregnant audiences under various brands, including The Knot, The Nest and The Bump. It provides local and national online advertising programs, which are two of its revenue sources, via these platforms. At the same time, it provides opportunities for its audience to purchase products and services by offering programs that enable vendors to sell through its online properties and earns related commissions from the transactions. Further, it also publishes and sells various related magazines comprising national editorial content and region-specific information.

(Source: nidscores.com)

52-Week High In The Past Week

Shares of XO Group Inc. reached a new 52-week high on May 30, 2018, hitting a peak of $32.93. Shares closed at $32.86 on that trading day, with a total rise of 93.29% since June 1, 2017 and is still up-trending. The company now has outperformed S&P500 by 71.43%. Technically, the new 52-week high is an important milestone for XOXO because it shows very positive momentum and could be viewed as a signal for investors to buy.

Q1 Financial Results Show Exciting Operating Momentum

The Q1 report, released on May 2, shows that during the first quarter, the XO Group team delivered strong financial results and the amount of engagements with XO’s platform and products is constantly increasing. The steadily growing business and an operational momentum achieved created a positive signal in the market and confidence for investors. The stock price increased by 12.8% to $24.76 on the same day and surged by 32.25% to $29.03 in the next one week.

Total company revenue for Q1 was up 2% to $38.3 million from $37.6 million during the prior-year period led by a 17.5% increase in local marketplace advertising revenue and a 23% increase in transactions revenue.

The topline growth in local market place was driven by the good performance of local sales. As a media and technology company, XO Group mainly gains profits from online advertisement for its partners and vendors, which emphasizes the importance of a good sales team. According to Michael Steib, the CEO of the company, the team successfully attracted more top talents in the past quarter. Therefore its improving productivity and intensive expansion is driving the business at a completely new level. The company has been bringing in lots of new vendors and ended the quarter with over 28,000 paying vendors, a 23% year-over-year increase.

Exhibit: Performance of Local Marketplace

(Source: Investor Presentation)

Current Strategy Is Working – Continued Shifts Towards Growth Businesses

Local marketplace and transactions, the company’s current growth businesses, made up of 74% of the revenue and in total increased 19% year-over-year. It is driven by XOXO’s strategy in continuously shifting from the businesses facing challenges, namely national online advertising and publishing, to the two growth businesses.

There is significant and unique market opportunity in these two businesses. Although XO Group holds a leading position in the US wedding marketplace, there is still huge room to grow. On one hand, the market is large and highly fragmented and hence great market opportunities exist. For the local marketplace, only 5% of a total of 500K local wedding professionals are currently advertising with the company’s flagship brand, the Knot. For the transactions segment, the company is facilitating a smaller percentage of 150M total gifts, valued at more than $10 billion, purchase market. On the other hand, XO Group is uniquely positioned in the market since there has been no proven and efficient way for couples and guests to connect with relevant partners. As the leader in the weddings space, the company is expected to capture more of the marketing spend by local wedding vendors and more of the commission payments paid by retail and commerce partners.

Exhibit: 2013-2017 Revenue By Segment

(Source: Investor Presentation)

The company kept investing in both areas. Some of the local marketplace initiatives include launching platform features to improve marketing opportunities and drive more business to vendors, growing inside sales and retention teams and investing in best-in-class sales training and development for sales organization. Regarding the transactions initiatives, XO Group has strengthened their wedding website products, enhanced their registry offering and optimized revenue-generating third-party products.

Good News – Updated Targeted EBITDA Margin

As announced in Q1 report, the long-term target of adjusted EBITDA margin was updated from 20% to 20-22%, another positive signal of the company’s better operating efficiency and increasing confidence. Despite the revenue transition to the growing businesses, total operating expenses decreased 6% to $32.2 million, led by a 10% decrease in general and administrative expenses. It is again caused by the overall strategy of business shifting, under which the cost was cut in non-strategic areas. It was achieved primarily by less headcount costs, an increase in internally developed capitalized projects, and lower consultant expense. As a result, the adjusted EBITDA margin was pulled up to 21% in Q1 from 18% in 2017.

Exhibit: Adjusted EBITDA For Past Five Years

(Source: Investor Presentation)

Current I Know First Algorithm Bullish Forecast for XOXO

Below is the latest 3-month forecast I Know First algorithm released as of June 5, 2018.  I Know First provides a bullish signal for XOXO, which agrees with the discussion above.


Along with the release of an impressive Q1 2018 result, XO Group celebrated its stock price momentum in the past month. The substantial growth in 2018 has been primarily driven by the stronger performance of the local sales team and the successful implementation of its business transition strategy. Looking ahead, there is large and unique potential market opportunity for XO Group given its attractive business model and its leading market position. Strong confidence has also been shown from the company’s increased EBITDA margin target.

How to read the I Know First Forecast 

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