Deutsche Bank Reiterates Buy on GSI Commerce

The valuation looks attractive and I would be buyers of the shares at these levels. See my prior write-up on the company.


From Analyst Herman Leung:
Levers of Business Growth Remain In Tact - BUY

GSI is not sheltered from this macro economic slowdown, but we
believe the early stages of online penetration by these massive
multi-channel retailers, growth in interactive marketing services
and its service-fee model offers an attractive opportunity for
investors. As such, we maintain our BUY rating and $15 price
target. Results from 4Q were solid and guidance was in-line to DB
expectations.

Tough Comp with Hershey's One-Time Benefit Last Year

While 1Q guidance was in-line to expectations, management
directionally guided 2Q EBITDA to decline, but this is because 2Q09
faces a tough comp from the $2mn one-time EBITDA benefit from
Hershey's last year. Excluding this Hershey's deal, we fully expect
EBITDA to grow in 2Q09, especially as the service fee model
transitions (Dick's) and its e-Dialog business remains healthy.
Additionally, GSI is also seeing a healthy pipeline in 2009, with 5
new pieces of business. As for 4Q results revenue/EBITDA came in at
$391mn/$68.7mn better than. DB at $380mn/$68.3mn.

Updating Estimates

Post 4Q results and factoring consideration of management direction
for 2009, we are adjusting our estimates for 2009. As such, for 2009
we are now modeling revenue of $937.5mn (-3%Y/Y) and EBITDA of $90mn
(+9%Y/Y), compared to $988mn/$92mn previously. Our FCF estimate for
2009 is $43mn (+11%Y/Y), on cap ex assumption of $48.5mn. For 1Q09
we are modeling revenue/EBITDA of $188mn/$2.4mn, compared to $380mn/
$68.3mn previously.

$15 Price Target

Our Price target to $15 is based on 10x our 2009 EBITDA estimate of
$90mn. This multiple is at a premium to the e-commerce group trading
at 7x 2009 EBITDA estimates given its diversified client base with
long term contracts. In addition, the 10x 2009 multiple is at a
discount to Amazon's average forward-year EBITDA multiple of 19x and
at a premium to Digital River's average forward year EBITDA of 6x,
given its diversified customer base of 88mn active members, and at a
premium to Digital River, given its 30%+ revenue concentration from
one client. Risks to our investment thesis include loss of key
customers, seasonal business fluctuations.