Ad network, cash flow make ValueClick look undervalued.SHARES of ValueClick Inc., one of the world's largest online marketers, received a nice bump in the wake of last month's report of solid second quarter results. The stock rose from around $14 per share to about $18. Now, several analysts are saying the best is yet to come for the Westlake Village firm, which specializes in online applications for search marketing, display advertising, lead generation, ad serving, e-mail technology and comparison shopping. The company's second quarter revenues of $130 million were well above analysts' expectations of around $120 million. ValueClick generated about $30 million in free cash flow and ended the quarter with $188 million in cash, or $1.90 per share. Analysts are expecting the stock to move to about $22 to $24 per share by year's end. "We think it's undervalued Undervalued A stock or other security that is trading below its true value. Notes: The difficulty is knowing what the "true" value actually is. Analysts will usually recommend an undervalued stock with a strong buy rating. for a couple of reasons," said Richard Fetyko, an analyst at Merriman, Curhan and Ford. "This is one of the largest online ad networks in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ." ValueClick was founded in 1997 and took on a leadership role in the sector as the online advertising market developed. The company created networks of publishers and more than 5,000 advertisers, including eBay Inc., Visa USA Inc., Wells Fargo Wells Fargo armored carriers of bullion. [Am. Hist.: Brewer Dictionary, 1147] See : Protectiveness Wells Fargo company that handled express service to western states; often robbed. [Am. Hist. & Company, Nissan, Dell Computer Corp., Hewlett Packard Development Co. and Expedia.com. Advertisers were charged for display ads, search and email marketing and lead-generation ads priced on a performance-driven basis. The company, whose symbol is VCLK VCLK Video Clock VCLK Virtual Clock VCLK Value Click and is traded on the Nasdaq, was aggressive in its buy-back program. ValueClick repurchased 5.9 million of its shares for $88.4 million and year-to-date has bought back 6.9 million shares, or 6.5 percent of available shares. Fetyko estimated that the continued cash flow in 2006 would yield an additional $65 million in the second quarter and said that his firm was raising its estimates on ValueClick for 2006 and 2007. "They have an impressive amount of cash flow," Fetyko said. "They have been buying back their own shares, which is a good sign. I think they'll be riding the coattails coat·tail n. 1. The loose back part of a coat that hangs below the waist. 2. coattails The skirts of a formal or dress coat. Idiom: on the coattails of 1. of the online advertising trend for a long time." Fetyko pointed out that the unit at ValueClick facing the largest challenge was the search marketing division, which the company would like to see emulate em·u·late tr.v. em·u·lat·ed, em·u·lat·ing, em·u·lates 1. To strive to equal or excel, especially through imitation: an older pupil whose accomplishments and style I emulated. 2. similar divisions at Google and Yahoo. "Probably the biggest opportunity they've missed is this one," Fetyko said. "They don't have a strong search marketing offering. But they still have a fair amount of cash." According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. analyst Heath P. Terry of Credit Suisse The Credit Suisse Group (SWX:CSGN, NYSE: CS) is a financial services company, headquartered in Zürich, Switzerland. It is the second-largest Swiss bank, behind UBS AG. , the earnings upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside was due to a combination of better revenues and solid operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. control. "We continue to believe that ValueClick will benefit from the strong operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. within online advertising," Terry wrote. "With a broad base of assets in affiliate marketing Affiliate marketing is a method of promoting web businesses (merchants/advertisers) in which an affiliate (publisher) is rewarded for every visitor, subscriber, customer, and/or sale provided through his/her efforts. , analytics and advertising networks, we believe that ValueClick is well positioned to take advantage of the accelerating shift of ad dollars online." Terry wrote that ValueClick will benefit for the strong operating environment within online advertising and he predicted that the company would outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. , raising its price target to $22 a share. Acquisitions pay off ValueClick also recently installed a technology upgrade for its European display advertising, facilitated by its Sept. 2005 acquisition of FastClick. With the technology in place, ValueClick clients worldwide now have access to the full functionality of its network, including advanced targeting, campaign management and reporting tools. The company will also benefit from its recent agreement with one of its subsidiaries, Mediaplex, and EyeWonder Inc. to provide advertisers and agencies with a combination of integrated ad serving, rich media and video ad technology and services. The pact gives Mediaplex clients direct access to EyeWonder's suite of advanced rich media and video ad products, including expendable and floating advertising. "This new relationship is a unique combination of the industry's most comprehensive online ad server technology and the Internet's leading rich media and video ad products, reporting and services," said ValueClick President Tom Vadnais. ValueClick Inc. (Nasdaq. VCLK) YEAR (Dec. 31) 2005 2004 Revenue (millions) $304 $169 Total Expenses (millions) 240 134 Operating Income (millions) 64.4 35.5 Net Income (millions) 40.6 31.2 Earnings Per Share $0.45 $0.37 SUMMARY Business: Online advertising sales Headquarters: Los Angeles CEO: James R. Zarley Market Cap: $1.7 billion Dividend Yield: N/A Total Liabilities: $111 million P/E Ratio: 35.87 Long-Term Debt: $0.0 [GRAPHIC OMITTED] |
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