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To: Elroy who wrote (32683)	5/23/2007 12:40:55 AM
From: Bill Harmond	Respond to of 57684

ThinkEquity today VCLK: Raising Target To $43 As VCLK Should be Next; Several Suitors Await THINK ACTION: We are reiterating our Buy rating and raising our price target from $37 to $43 as we believe multiple suitors now await to acquire ValueClick, the last digital advertising asset with substantial scale and footprint, at a meaningful premium. We believe the risk/reward is exceedingly attractive at current levels given that our $43 price target reflects 22x EV/2007E EBITDA (versus recent M&A comps at 22x-37x EV/2007E EBITDA); rests in the middle of our take-out range of $32-$52, which includes EBITDA sensitivity to potential outcomes from the FTC inquiry into VCLK's lead generation business; and that our worst-case scenario is $32. KEY POINTS: VCLK's Scale, Footprint and Scarcity Value Should Fetch Premium We believe ValueClick's (VCLK) will take advantage of the prevailing M&A environment to pursue a sale and that buyer demand for VCLK is high and immediate given: 1) the scarcity of VCLK's assets as the only remaining third-party monetization engine with the scale/footprint of publishers/advertisers equal to or greater than aQuantive (NASDAQ: AQNT, $63.79) and DoubleClick; 2) checks indicate that Microsoft should continue to acquire, VCLK's publisher footprint would be complementary to the AQNT acquisition, and AQNT/VCLK have considered a combination in the past; 3) recent acquisitions have been as much defensive as offensive, and we believe Google (NASDAQ: GOOG, $470.32), Yahoo! (NASDAQ: YHOO, $29.75), and Time Warner would not only find VCLK core to expanding their own publisher ad networks, but would be acutely interested in preventing each other and MSFT from owning it; and 4) the long list of interested buyers including IAC/InterActiveCorp, News Corp., Experian, and eBay anxious to avoid being shut out with the last large-scale digital advertising property on the line. M&A Comps, EBITDA Sensitivity Analysis Yield $32-$52 Take-out Range Although we believe the Federal Trade Commission's inquiry into VCLK's lead generation business will not deter a long list of buyers and should ultimately lead to modest-to-zero downside to estimates, we have included an EBITDA sensitivity analysis as part of our take-out valuation analysis. Our worst-case scenario of $32 per share assumes 23% downside to our FY07 EBITDA estimate and a take-out multiple of 21x EV/2007E EBITDA. Our best-case scenario of $52 per share assumes 7% upside to our FY07 EBITDA estimate and a take-out multiple of 25x EV/2007E EBITDA. We believe that our multiple range of 21x-25x EV/2007E EBITDA may prove conservative given the scarcity value and scale of VCLK's assets. FTC Investigation May Have Modest Near-Term Impact; Industry Shake-Out Could Create Opportunities Longer Term We believe that the FTC's recent notification to VCLK of its inquiry into the company's lead generation practices could lead to a small fine and modest modifications of VCLK's incentivized marketing (less than 20% of company revenue and a slightly greater percentage of profits). Our checks indicate that VCLK is compliant with current offline and online lead generation practices and we believe the FTC's heightened scrutiny of the market should help wash out less-compliant competitors and create market share gain opportunities for VCLK over the longer term.