ValueClick (Commission Junction) Earnings Review Coming Up… and Looking Good!

12:00 am   -   November 1st, 2006

Earnings Preview: ValueClick

© 2006 The Associated Press

NEW YORK — ValueClick Inc. reports earnings for the fiscal second quarter Wednesday after the market closes. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Shares of digital marketing services company ValueClick fell with the rest of the online advertising sector in September after Yahoo Inc. said a slowdown in automotive and financial services ad spending would weigh on its third-quarter results.

Yahoo’s stock rebounded as most industry watchers concluded the ad shortfall was largely limited to Yahoo business.

During the quarter, ValueClick signed a number of deals, including one to integrate its ad serving and tracking technology with EyeWonder Inc., which helps advertisers create ads with video and animation.

BY THE NUMBERS: Analysts polled by Thomson Financial forecast a profit of 14 cents per share on $134.4 million in sales.

In August, ValueClick said it expected quarterly earnings of 14 cents per share on revenue of $133 million to $135 million.

ANALYST TAKE: In a recent note to investors, Jefferies analyst Youssef Squali wrote “We believe that advertisers have been increasing their demand for ad networks inventory…given their superior reach and attractive return on investment, which bodes well for ValueClick’s media business.”

The analyst estimated that revenue from ValueClick’s advertising network segment rose 89 percent year-over-year, including contributions from the FastClick network, which ValueClick acquired in September 2005.

Earlier in October, RBC Capital Markets analyst Jordan Rohan downgraded the stock to “Sector Perform” from “Outperform,” largely based increased competition from Google.

Rohan noted that Google plans to offer discounts to European agencies that allocate budgets toward its small but growing display advertising inventory.

“Google’s desire to push into the resale of display advertising threatens ValueClick at the margin,” Rohan wrote.

He also noted that Google may step up its cost-per-action business, where advertisers pay only if Web surfers do certain things, such as make a purchase or register for a service. “This may pressure the WebClients and Commission Junction units of ValueClick,” Rohan wrote.

Rohan added that with shares up in the quarter, “there is a chance of disappointment among investors,” even with some potential to beat third-quarter expectations.

STOCK PERFORMANCE: Shares of ValueClick rose 20 percent during the quarter, ending September at $18.34 on the Nasdaq. In the past 52 weeks, the company’s stock has traded between $13.15 and $20.98.