from piper jaffrey
GoTo.com, Inc. - Top Pick. GoTo.com remains our top pick. We believe recent profit taking and general pullback in Internet and technology shares represent a buying opportunity. Our research indicates that the average click charge is increasing and the traffic continues to be strong. While this is a seasonally slow quarter, we still expect a modest uptick in the number of advertisers. We note that any increase in the average spending per advertiser could mean a major upside for GOTO, with its 42,000 advertisers. The Company succeeded in increasing both the number of advertisers and the average spending per advertiser during the most difficult time that online advertising has ever seen. As such, we expect any improvement in the ad market will be good upside to our existing estimates, making the valuation more compelling. Currently trading at a CY02 P/E of 58x, and CY02 P/S of 2.8x, we believe GoTo is undervalued relative to Internet peers such as DoubleClick. We believe GOTO is likely to trade at the high end of the 3.0x-3.5x revenue multiple range, or $18-$22, without any new catalyst. The stock has strong positive momentum that should help expand the multiples if there are additional positive catalysts. |
