Keith Fitz-Gerald is dangling “The Biggest Upside Earnings Surprise in Two Decades” as an inducement to convince folks to sign up for a subscription to Money Map Report, which is the “entry level” newsletter for Money Map… so what is the stock they’re talking about?

He calls it a “hybrid ‘dating’ stock,” and thinks that it will launch a historic 500% surge on November first, when they release their next quarterly earnings report.

And if you’ve read this far, I expect you’re probably not so interested in paying for a “special report” on this company… and you’d rather think for yourself?

Not a bad idea… but maybe it’s worth actually finding out what the stock is? After all, you never know where your next good investment idea is going to come from… so let’s sift through the clues, ID the stock for you, and give you a chance to research it for yourself and discuss it with your fellow Gumshoe readers. Then you can go subscribe to his newsletter if you feel like it, or spend some time seeing what other subscribers think of the service… but you won’t be driven to it by a lustful need to ID this one stock that will change your life.

So… on to our exercise in detective work as we sniff out the clues in the ad… what does Keith tell us that might lead us to the name? Here’s the first bit:

“On Nov. 1st We Believe Every American Will Want to Own This Stock

“Just days from now, on November 1st, the CEO of a tiny online networking company is expected to make an unprecedented announcement…

“He will disclose his company’s 3rd quarter earnings – right now it’s estimated to be a huge 325% blowout in one quarter alone.

“Most companies are lucky to boost their earnings by 10% in a quarter.

“This is 35 times bigger than that… We’re looking for this company’s share price to blow out.

“Our analysis shows that it could easily run from $5 to $30 over the next 12 months.”

And then we get the hints about the sector (yes, I already told you it’s online dating… but play along!)….

“According to Pew Research, 15% of American adults have tapped into the online dating arena – that’s more than 37 million people.

“And with a whopping five million active users, this company currently consumes 10% of the online dating market in America.

“But here’s the kicker…

“This firm could easily snatch up 25% of the entire market by 2020, adding nine million more users.”

OK, I don’t know if any company has ever “easily” gone from 10% market share to 25% market share… but yes, we’ll concede that it’s certainly possible.

And we get some hints about the companies who own shares:

“Institutional investors, including legendary market movers like Renaissance, Oxford, Vanguard, BlackRock, and Northern Trust, already own 30% of this company’s shares…

“Even representatives from renowned global hedge funds Deutsche Bank and Goldman Sachs have declared their position.

“These are the same firms who are known to send small stocks into the stratosphere. And now they’ve set their sights on this one company.”

That’s hooey. Many of those institutional investment firms own large stakes in this “secret” company because it’s in a few widely followed small-cap indices, and those are primarily index-driven fund managers. And Deutsche Bank and Goldman Sachs and their related funds own pieces of probably the vast majority of publicly traded stocks in the United States — their names on the owner list should not automatically confer any particular sheen of desirability, even though yes, part of the reason that small caps become big caps is that their growth brings larger institutional ownership, which increases visibility and stability, which helps them grow more.

And yes, this stock actually has an unusually low institutional ownership — probably mostly because it has a market cap below $300 million.

I’m letting the cat out of the bag slowly here, sorry — but let’s check the final slate of clues to make sure I’ve identified the right stock:

“Now, of course no one – not even me – can be 100% certain what the earnings numbers will show until the company announces them. But if everything goes as I expect, when word gets out, this small stock will no longer be trading for less than $6.

“It will enter into double-digit territory. I’m expecting $30 a share or more, easily.

“Again, this is a very rare situation.

“This company has a market cap of $300 million.

“It’s very tiny and could easily double in price overnight.

“That’s why I’m telling you this now before this company’s major earnings ‘surprise’ announcement is released – and before I publish my Alert to my readers.”

So now we know that the stock is around $6, and the market cap about $300 million, and that’s all we need to top off the Thinkolator with clues and get it chugging away. As expected, the solution to the teaser comes out pretty quick, this is… MeetMe (MEET).

You might not be familiar with these guys — they are in some ways the “also rans” in the dating world (sorry, they call it “social discovery”), but they’ve been around for a while, hiding in the shadow of giant Match.com and all its various owned services like Tinder and OKCupid (MTCH)… and even, arguably, disappointing compared to Spark Networks (LOV), the owner of niche dating sites JDate and Christian Mingle, among others (I wrote about LOV for you after hearing a conference presentation about it a few years ago, and owned it myself for awhile)… but of the three “online dating” investments you could reasonably consider in the US stock market, MEET has been by far the most successful this year.

Match is much larger than the others, with a market cap over $4 billion, but it’s also the newest stock — it came public just under a year ago as a separate company (it had been under the umbrella of IAC/InterActive (IAC) before the IPO spinoff, and IAC still has voting control), and it has done well — it has also been repeatedly teased by David Gardner at the Motley Fool as the “next Amazon” when it comes to growth potential, which has probably helped the stock to rise roughly 20% or so since the IPO (it also fell sharply in the first few months of this year, which was when the Foolies got behind it, so it’s up a more dramatic 60-70% since they started teasing it).

MeetMe has done even better than that — it’s been publicly traded for more than a decade (it was called MyYearbook until 2012, when it acquired Latin American social networking site QuePasa and rebranded itself MeetMe) and has had a few wild swings up and down during that time, but the past year has been a boom time and the stock is up more than 150% over the last twelve months. And that’s despite the fact that the shares have swooned 30% since the last earnings report, in early August.

So what’s the story? Well, MeetMe does have rising analyst estimates for their current quarter and full year (and next year) earnings — and they have reported big “surprises” for several recent quarters, though one of those was a deeply negative surprise. Part of the crazy-sounding “325% Increase in Earnings” is that these are tiny, tiny numbers we’re dealing with — MEET just became profitable for the first time early last year, after a decade of losing money each quarter, and the bouncing up and down from losing one cent per share to earning five cents per share is huge in percentage terms.

Right now, analysts believe MEET will earn ten cents per share in the next reported quarter (there are only four or five sell-side analysts covering MEET, so take this with a grain of salt), which would indeed be a massive improvement over the year-ago quarter when they lost four cents per share. Could there be a vast “surprise” on top of that?

Heck if I know.

The company has forecast substantial revenue growth in the 20%+ neighborhood for both this quarter and the full year, with a large part of the growth in the fourth quarter coming from their acquisition (for cash and stock) of competitor Skout, which closed just last week.

For the third quarter, which ended just before the closing of the Skout acquisition, they issued guidance over the summer for revenue in the $17-17.5 million range — and then confirmed, just last week, that their revenue was indeed right in that range (they said $17.2 is the preliminary number now). So they might reasonably be expected to be “on track” with the rest of their guidance, though they don’t specifically guide us to an earnings per share number (they offer forecasts for EBITDA and revenue).

Presumably that means the analysts are fairly up-to-date now on the likely numbers for this quarter, which should indeed get announced on November 1, and they’ve raised their numbers accordingly — the average earnings expectation for the quarter was seven cents a few months ago, and bumped up to nine cents last month and now ten cents. Given the tight guidance, it would indeed be quite “surprising” if there was a huge upside surprise in quarterly earnings — though I would guess that probably their forecasts about the fourth quarter and 2017 will get more attention than the quarterly numbers, given that they’ve said that they expect the Skout acquisition to be immediately accretive to earnings (“accretive” just means “will increase overall earnings per share” — meaning the overall increase in net income will more than make up for the dilutive impact of issuing new shares to make the acquisition).

So given all of that, what’s the current valuation? Well, if they do indeed hit that ten cents a share number for earnings (and it seems very likely that they’ll at least be close to that), then the trailing earnings per share will be 38 cents for the last four quarters. That gives a trailing PE of about 14, which is below average.

When it comes to forward forecasts, the expectation among analysts (there are only four making guesses, so, again, be careful) is that MEET will earn 53 cents per share in 2017. At $5.41, then, that’s a forward PE of about 10 and an annual earnings growth rate of about 20%… which makes the stock look pretty cheap.

So… why is it so cheap, based on earnings, if they are growing pretty nicely right now, expected to grow even a little faster after the acquisition? And why, since the valuation is pretty low, does it have a huge short ratio (about 20% of the float of MEET is sold short, meaning folks are betting that the stock will fall)? Is it just that perceptions are that MEET is a minnow in a winner-take-all business? Or is there something else nasty hiding in the closet?

Well, first we should be clear about one thing: MeetMe doesn’t really call itself a “dating app” — they call themselves a “social discovery” platform, mostly done through their mobile app, and until a few years ago they really called themselves a “social network” until it became clear that Facebook was the winner in that “winner take all” space.

I hadn’t ever looked at it before, but I did just try setting up an account at MeetMe and it looks a lot like a dating app to me — all I see on the first page is a seemingly endless series of photos of “women near you,” and it seems entirely photo-based, I didn’t see any other messages (though there are chat/discuss features). It’s kind of like seeing a stream of faces walking by and pulling them out at your whim to ask if they want to chat — which is really, really, really not my thing. But apparently it’s appealing to some.

I didn’t download the app, which is where the business is overwhelmingly concentrated, I just skimmed through in my web browser for a minute or two. The app is likely different, but both are entirely ad-supported — unlike most “online dating” sites, there’s no push for paid memberships or “upgrades.” Skout seems to be much the same. So while they call themselves social networking sites, my impression is really that they’re low-rent online dating sites — I’m not sure if that’s better or worse. Competing with facebook is a non-starter, but both Skout and Meetme seem kind of like “browsers” that you would use on top of facebook to find new people based on what you think of their picture and their location… and competing with Tinder and Match.com for people who are more focused on finding a mate or a date also seems like a challenge, so I have a hard time getting their business plan straight in my head. They seem to try to place themselves right in the intersection of messaging and date-seeking — more casual than Match.com, more date-focused than Line or Snapchat.

But, it must be said, I’m a happily married guy, well into my 40s, and driven more to words than pictures, so I am really not the target market for either MeetMe or Skout. There’s a very good chance that I “just don’t get it”.

In terms of size, in the last quarter they reported 1.2 million daily active users and 4.8 million monthly active users. So that means the company is being valued at about $235 per daily active user (DAU) or $59 per monthly active user (MAU). With trailing twelve month revenue of $63.9 million, that means a MAU generated about $13.31 in revenue over the past year. Revenue growth for MEET has been about 40% over the past year, though it is widely expected to be closer to 20% in the next few years. Earnings are expected to grow 28% next year and 24% in the following year.

By way of comparison, match Group reports that they have 59 million monthly active users across all of their brands (about 5 million of them are paying users), so that would mean that Match Group users (including Plenty of Fish, Match.com, Tinder, etc.) are valued at an average of $75 each. And at $1.12 billion in trailing twelve month revenue, that means an average Match user generated about $19 in revenue over the past year. Match Group revenue increased 20% over the past year, and is expected to grow earnings 23% this year and 22% next year.

Because Match gets a big chunk of their revenue from paying members and MeetMe does not, perhaps a better comparison is an ad-fueled social networking company… the only ones that are really viable right now are Facebook and Twitter.

Facebook is valued at about $215 per MAU, with 1.7 billion monthly active users, sales growth is over 50% but probably coming down to 30-40% next year, earnings growth is close to 200% last quarter but probably coming down to 60-70% next quarter and drifting down to 25-35% over the next five years.

Twitter is valued at about $40 per MAU, with 313 million monthly active users, sales growth is slow right now at 5-10%, and expected to pick up slightly to 12-15% growth over the next year or two. Earnings are not currently growing, but analysts estimate that they’ll close out 2016 with 25% earnings growth over 2015, and that earnings will grow by 25% again in 2017.

All of those examples are far more expensive than MeetMe on an earnings basis — MeetMe is at 10X next year’s earnings, MTCH at 19X, FB 25X, and TWTR 30X. Spark Networks (LOV) is not profitable and not expected to get there next year, so they don’t have a PE.

So the question is: Is it cheap because it’s a lousy company that can’t compare to the market leaders in either online dating/”introductions” or broader social networking? Or is it cheap because we’re not giving them credit for their growth prospects?

I don’t know. But it doesn’t look like the kind of company I’d be particularly excited about getting involved with — that doesn’t mean it won’t “surprise” next month and see the stock pop, that’s entirely possible (as is the opposite), and they are reporting earnings growth… it just doesn’t feel right to me.

You may feel differently. With the low price and the high short interest, the stock should be extremely volatile if there is an earnings surprise or a big increase in forward guidance that gets investors excited — if the stock pops in a big way, short sellers might well have to buy to cover their short positions, and that “short squeeze” action often causes a spike to go even higher. So perhaps that’s a rationale for considering this “shoot higher on Nov. 1” idea from Keith Fitz-Gerald, but, frankly, I felt a little like I needed a shower after just a minute or two of browsing MeetMe and Skout, so I’ll pass.

FYI, if you’d like to get a sampling of the “bear” case on MEET, which might have something to do with the large short interest, there are a couple SeekingAlpha articles here and here that argue the stock is too high for a variety of reasons (patent lawsuit, “sexual predator” haven that will deter tier 1 advertisers, overloaded ad load to generate revenue growth are the three main negatives that I culled from skimming those articles).

The Nov. 1 date for their next earnings report is an estimate, I believe — I don’t think they’ve formally announced the date they’ll report yet, but they reported on November 3 last year. And if you want their take on the business so far, the latest investor presentation for MeetMe is here and the Skout acquisition presentation is here.

And that’s all I’ve got for you today… have any strong feelings about MEET or other “social discovery” sites or apps or investments? Think I’m being too much of an old fuddy duddy? Any guesses as to whether the earnings will really “surprise” next month? Let us know with a comment below.

Disclosure: I own shares of and call options on Facebook and a small position in Twitter call options, I do not have a position in any of the other stocks mentioned above. I will not trade shares of any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.