ValueClick Investigation Looms

ValueClick, Inc. (VCLK - Analyst Report) is a leader in the online advertising industry, which we believe is a growth business as traditional marketers shift advertising spending from traditional media to online outlets. The company is well-positioned with its display advertisement network, which reaches an estimated 75% of U.S. online consumers.

Due to the fallout of the FTC investigation, we expect continued declines in VCLK’s lead generation business. Moreover, the company faces intense competition from Google’s (GOOG - Analyst Report) Performix and other direct advertisers and has lost its largest customer eBay (EBAY - Analyst Report). We therefore maintain a Hold rating on the shares of VCLK and lower our price target to $18.50.

VCLK is currently trading at a P/E multiple of 21.5x our 2008 earnings per share estimate of $0.82, a discount to the industry median. Although VCLK raised its full year guidance, this was largely the result of a $5 million one-time gain in the first quarter, and lowers guidance for the remainder of the year by default. We therefore lower our target price to $18.50, a multiple of 22.6x our EPS estimate.
 
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