ValueClick Stock Is Surging but Sale Seen as Unlikely

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An old saying on Wall Street tells investors to “buy on rumor, sell on news.” But for speculators in the stock of ValueClick Inc., the news may never come.


ValueClick jumped 21 percent in two days last week after analysts at Stanford Group wrote to investors about how the company could be acquired. The note named Microsoft Corp., Yahoo Inc. or News Corp. as potential buyers.


However, other analysts don’t feel ValueClick has positioned itself for a takeover.


“This is not a front-burner goal for management. When you look at their behavior, they have continued to acquire,” said Eric Martinuzzi, an analyst at Craig-Hallum Capital Group. “When you position yourself for sale, you stop buying other assets. You maximize your balance sheet. Both require throttling back on long-term investments.”


ValueClick’s most recent expenditure came in mid-July with its purchase of MeziMedia, a comparison shopping site operator, for $100 million. Last year the company acquired Shopping.net and announced a $150 million stock buy-back program.


All these moves signal management’s intention to run the company rather than sell it, according to Martinuzzi, who gives the stock a buy rating.


“At the same time, they know what’s going on around them,” Martinuzzi said. “There has been a recent spate of acquisitions, and they were not a target themselves.”


Indeed, the Stanford Group note that set off the stock-buying spree was conjecture based on the fate of other companies in the online advertising sector. In April Google spent $3.1 billion to buy DoubleClick, a digital marketing firm. The following month AOL bought Adtech, an online ad company in Germany, and Microsoft paid $6 billion for AQuantive, an online ad agency. Then in early September, Yahoo announced a buyout of Blue Lithium, a global ad network, for $300 million.


ValueClick, the second-largest online advertising network, has a market capitalization of $2.3 billion. A strategic buyer would have to pay that plus a control premium.


As a purely financial buy, ValueClick looks attractive. According to Mark Bacurin, analyst at Robert W. Baird & Co., the company has a strong financial profile with $373 million in cash ($3.67 per share), no debt and a projected free cash flow of $102 million for 2007. “We expect the company to use its capital resources to continue to pursue acquisitions,” he wrote in a note on Sept. 13. Bacurin rates the stock “neutral.”


Whether as acquirer or target for acquisition, ValueClick remains one of the most-watched tech stocks in Los Angeles County. According to Bloomberg, 25 analysts follow the company, with 15 recommending their clients buy it and 10 maintaining a neutral or hold strategy. None recommends selling it. The composite target price is $26.50, a 15 percent premium over its current trading price.

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