Relative Strength -- Overture Services (OVER) 29.00 +0.55: This is yet another name that appears to be holding up well versus the broader markets. When the major averages bottomed the second week of October, Overture managed much more than a sympathetic bounce. In fact, the shares broke out to a six-month high.
From the standpoint of what the company does, Overture is in the business of pay-for-performance search services on the Internet. The company's search service enables advertisers to bid in an ongoing auction for priority placement in the company's search results. The highest bidder, which becomes the first website on the consumer's search results, pays Overture its bid price every time a surfer clicks through to the advertiser's website.
With the company's business model in mind, it becomes relatively clear that its customer base is extremely important. Last week, shares of Overture surged on strong volume after the company announced it had landed CNN as a client. Under terms of the agreement, Overture will provide its paid search listings for three of CNN News Group's properties: CNN.com -- which is the top news website -- CNNSI.com and CNNMoney.com.
From an operational standpoint, Overture is expected to post fiscal 2002 earnings of $1.29 per share followed by reduced fiscal 2003 earnings of $1.01 per share. Yet on the topline, the projected fiscal 2002 revenues of $659 million are expected to grow 38% year-over-year to $909 million. Note that its current market cap is in the ballpark of $1.7 billion which factors to a forward Price/Sales ratio of 1.88.
Now we've already touched on this issue of its technical strength. After carving out a fourteen-week base ranging from June to October, the shares ran 42.5% in a matter of just ten sessions. Then on November 1st, Overture got hammered by a Salomon Smith Barney downgrade in which the firm cut its price target to 21 from 31. So with the shares back over 29.00 today, its relative strength is becoming more pronounced.
In fact, since November 11th -- the point at which Overture tagged "the target" at 21.00 -- it has returned 37.5%. By way of comparison, the Nasdaq is higher by 4.0% over the same time frame. Also note that since the Nasdaq topped out on December 2nd, Overture has bucked the bucked the broad market trend by adding two points. So the shares have established straight-line support now in the vicinity of 27.50 -- at the same time, its 20-day exponential moving average is rising towards that area 27.50 as well. For as long as those two levels hold on the close, the near-term bias in favor of additional upside should remain intact. Also keep an eye on how the shares respond once the broad markets begin their next leg higher. -- Mike Ashbaugh, Briefing.com
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