JPMorgan Maintains Hold on ValueClick After Earnings

While the shares are attractive at 4x earnings, the firm remains cautious on the company due to a challenging macro environment for advertising and consumer spending. I actually believe there is upside to the shares from here as advertising spending stabilizes and look for ValueClick to be an acquisition play in 2009.


From Analyst Tonwsend Buckles:
ValueClick reported better-than-expected Q4 results with adj. EBITDA of $38.2m, above our $33.5m estimate and company guidance of $33m-$36m. Operating EPS were $0.16 (ex. goodwill impairment), at the top end of guidance and $0.01 above our estimate. Revenue declines were not as steep as feared, down 14.6% (ex. divestitures), with upside from the comparison shopping, display, and affiliate marketing businesses. The company also maintained solid profitability with operating margin down only 20bps (ex. one-time charge in 4Q07).

Comparison shopping the biggest positive; welcome change from recent trends. The greatest upside came from the Comparison Shopping business - albeit with revenue still down 25% – which had been a big worry after a steep downturn in Q2/Q3. Management noted it made a number of adjustments to how its properties acquire traffic that yielded positive results and should provide more stability/visibility after a very erratic '08.

Q1 guidance in line with expectations, below consensus. Management gave guidance for Q1 – though did not provide a customary full-year outlook – calling for adj. EBITDA of $29m-31m and EPS of $0.11-$0.12 (off revenue decline of 22%-25.5%) vs. our estimates heading into the quarter of $30m and $0.11, and consensus of ~$33m and $0.14, respectively.

"Good" start to the year; tweaking up estimates, though still defensive. We view guidance as somewhat conservative after Q4's performance and management's commentary of a "good" January (particularly in the volatile media and comp shopping businesses); we are bringing up our Q1 adj. EBITDA by $1m to $31m and EPS by a penny to $0.12 at the high end of guidance. For '09, we are raising our adj. EBITDA to $136m from $128m, though remain cautious given VCLK's low visibility and difficult operating environment.

Encouraging quarter; still seeking stability, improved outlook. While Q4 was a good upside surprise after a fairly disappointing year – shares were up ~10% after hours – we remain cautious amidst a very weak advertising and consumer spending backdrop that we expect to remain a challenge to the business and lead to a weak 1H09. At 4x EBITDA, we find valuation attractive; however, we look for stabilization in the business and an improved ad/eCommerce outlook before becoming more positive on the stock. We reiterate our Neutral rating.