One of the companies that we have been following in the tech space has been Valueclick (VCLK), which provides online advertising solutions through various forms. The company has been active for a long time and is one of the dot com bust survivors. The company had made some great moves as it had secured funding during those great years but while others wasted their funds, Valueclick hung out to the funds.
It later was able to use those funds to buy several high growth and high valued properties such as Fastclick and Linkshare. But still, Valueclick has not been able to generate organic growth and its technology seems to have fallen behind competitors such as Google and thus growth has stalled.
So it is no surprise to see Valueclick come in with negative growth in today’s earnings report. The actual profits turned out to be better than estimated at .29$ per share while estimates were for only .14$. However, revenue ended up declining almost 13%, even worse than IAC Interactive’s report. No doubt, the context is difficult for all media companies that depend on advertising. But the industry leaders have been able to hold their ground. Valueclick issued guidance of 128-138$ millions revenue for the next quarter which indicates there is a distinct possibility that revenue could go down again, even in the upcoming fourth quarter, the biggest quarter for online advertisers with the black Friday as well as the holidays. This should be seen as a negative for the company.
The company discussed how it viewed overseas markets as an opportunity for growth and that may very well be but since they do admit that 85% of their revenues come from the US market, it would be surprising to see the company be able to turn it around on those markets alone.
To see Valueclick actually beat earnings thanks to cost cutting is actually a perfect opportunity to possibly go short on this stock. I guess it will depend how others judge this performance in how the stock performs in the next few days. From what I can see, even the revenue results are over estimates which could indicate a nice rise in the stock tomorrow.
The one thing I am always worried about when thinking about shorting Valueclick is the fact that it does remain an interesting acquisition target, especially at these low prices. Its technology is not as impressive as it was with competition catching up and more, but there is still a lot of value remaining in the company that could make it a potential target.