Barron’s Analyst Alexander Eule Recommends ValueClick:

THE NEGATIVES

a. Its shares are down more than 60% since last summer on a weakened ad market and a decline in takeover speculation. But, following the drastic selloff, ValueClick could now live up to its moniker.

b. The company derives much of its revenue by helping Websites sell advertising space. ValueClick also runs comparison shopping Websites, provides ad-serving technology to advertisers and enables Website producers to generate revenue from referral links.

c. ValueClick is the largest remaining independent play on online marketing services. Not a bad place to be with the U.S. online ad market expected to grow to over $50 billion by 2012 from about $26 billion today, according to research firm eMarketer.

d. ValueClick stirred up investor panic two weeks ago by slashing its fiscal 2008 outlook and lowering expectations for its coming second-quarter earnings report; shares plummeted 20% on the news.

THE POSITIVES

a. Long-term numbers are on ValueClick’s side. The firm eMarketer expects online advertising to represent over 15% of the total U.S. ad market by 2012 compared with about 9% this year.

b. The Internet is not going to be immune from an economic downturn, yet at the same time, the ad growth is increasing more than the other mediums.

c. Last week, ValueClick Executive Chairman James Zarley became the first insider to purchase the company’s stock in over two years; $1 million.

d. Microsoft could be back on the prowl, having dropped its bid for Yahoo.

e. Google, Yahoo and Microsoft are all moving toward one goal — having “one advertising platform where advertisers can basically buy any type of ad inventory on the Web across any sort of site.”

f. ValueClick’s global network of 21,000 online publishers could bring the online giants closer to that aim.

g. Minus a takeover, ValueClick still looks exceedingly cheap; the stock was trading at 11 times Ebitda  earlier this year.

h. Though Thursday’s earnings call could, of course, bring more unsettling news from ValueClick management, in that case, post-earnings weakness would be another buying opportunity for long-term investors.

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