Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : DoubleClick Inc (DCLK) -- Ignore unavailable to you. Want to Upgrade?

To: SteveG who wrote (667)	1/26/1999 7:03:00 PM
From: zalesky	Read Replies (1) \| Respond to of 2902

To all: Technically and fundamentally this stock looks very sound. Downward trend last few days basically just backing and filling. Any retrenchment into the upper 80s will be met by panic buying. Good Luck and see ya in the 100s soon!!

To: SteveG who wrote (667)	1/27/1999 1:29:00 PM
From: SteveG	Read Replies (1) \| Respond to of 2902

Here's some initial comments from SSB's Lanny Baker (OCR'd somewhat imprecisely): ~~~~~~~~~~~~~ Online Media: A New Portal Sets out to Scale the Mountain Salomon Smith Barney - Lanny Baker 01/27/99 Media(All) --SUMMARY: +Compaq's widely anticipated decision to set its Alta Vista search engine onto a higher growth trajectory is a positive for DoubleClick, while it may also add to the competitiveness of the mass audience/portal market. +Alta Vista intends to 1) go public via an IPO, 2) position itself as the "aspirational" brand among internet destinations, 3) emphasize e-commerce and e-services, and 4) leverage its relationship with CPQ. +Since Sept. 1998, Alta Vista's audience reach has grown from 16% of the online audience to just under 20%, and it currently ranks 12th overall. +Although other portal players have shown that the challenge of chasing market leaders Yahool and AOL is daunting, Alta Vista has headroom to move closer to the market leaders1 even if attaining #1 remains tough. +However, Alta Vista's emphasis on a CPQ "OEM boost" should be evaluated. SUMMARY & OVERVTEW: Compaq's decision to set Alta Vista off as a stand-alone Internet company, and to take the unit public in an initial public offering, should set Alta Vista on a higher growth rate trajectory during 1999. Without really pushing Alta Vista to its full potential, Compaq has managed to capture one of the top 12 audience share positions on the Internet with this fast search engine. With Alta Vista now independent, we would expect it to become more aggressive and persistant about expanding its scope, scale and potential. We note that until mid-year 1998, Alta Vista was run as a break-even unit of CPQ, eschewing the intense marketing and promotional push that the other search engines have undertaken as they have transformed into mass audience, full-service portals to the Internet. The acceleration in Alta Vista's business plan will no doubt lead to further audience share increases in 1999, beyond the +22% gain in audience reach seen at Alta Vista since Sept. 1998. Clearly, Alta Vista's newfound assertiveness will heighten the pace of inter-portal competition. That said, we believe that Alta Vista may be a large thorn in the side of the second and third tier portals than it will be for the current leaders, as explained below. In considering Alta Vista's anticipated increase in competitive vigor and new higher growth goals, DoubleClick is positioned as a clear beneficiary. Under the terms of a binding, three-year relationship signed a week ago, DoubleClick will provide Alta Vista's ad delivery, targeting and measurement needs with the DART technology. Additionally, Doubleclick will continue to sell the search and directory ad inventory on Alta Vista under the new agreement. At the same time that Compaq and Alta Vista will put greater resources behind the new portal, DoubleClick will also allocate increased resources toward maximizing the advertising potential of the site. Although DoubleClick's share price has recently moved higher in response to the new three-year binding relationship with Alta Vista, we believe Doubleclick's share price still does not reflect the full revenue and earnings upside contained in Alta Vista's enhanced business objectives. Doubleclick remains our top pick in the Online Media sector and out target price on DoubleClick is $120 per share, according to the valuation parameters outlined in our research note of last week. We rate DCLK a 1-H. Although Alta Vista will now become more aggressive in developing and executing its portal strategy, it is important to consider the company's strategy and where the strategy differs from the path pursued by the other portals. Alta Vista has stated that its primary objective is tied to e-commerce and e-services, making the portal more of a place to buy than a place to learn or become informed. In comparison, AOL, Yahoo! and their primary portal peers are more focused on gathering audiences and selling not goods and services, but rather selling the interest and attention of those audience members to advertisers and merchants. Financially, all this means that Alta Vista may have greater revenues (including product and service sale.) than the more media-oriented portals, although at a lower margin. Alta Vista's long-term model shows them being 3.5 times the size of Yahoos in terms of revenue, but with a 12% operating margin versus Yahoos's current 35% operating margin. Net net, if Alta Vista's model proves attainable, it would produce 20% more profit dollars than Yahool. However, we should note that Alta Vista's current annualize revenue run rate is about $50-55 million, while Yahoo! is generating $75 million in revenue per quarter at latest read. To catch up and pass Yahoo! on the revenue line, Alta Vista will need to expand the size of its online audience and to expand the number of ways in which the portal generates revenue. While we have little doubt that Alta Vista will be able to build significant businesses selling technology-related products and services in light of its Compaq parentage, we believe the audience growth goals will be more challenging. Alta Vista seems to be tying a large portion of its audience growth to OEM relationships with Compaq which will make Alta Vista the integrated default search engine/portal called up by Compaq PCs. Although the OEM relationship with Compaq has already had demonstrable impact on Alta Vista's audience growth, we note that OEM bundling can only go so far and may have limitations of its own. For instance, consider the Compaq PC user who connects to the Internet via an AtHome connection: The Compaq PC will attempt to push the user toward the Alta Vista home page, while the AtHome connection would direct the user to the Excite home page. Where the user would wind up in this scenario is anyone's guess. Our own suspicion is that many users, even with the above-described hardware/software/connection configuration, might still choose to direct their browsers and their attention to the Yahoo! home page. No doubt, hard-wired default start page set ups are strong influences on user behavior, but we still believe that brand affinities and user choice are a stronger determinant of user behavior in the Online Media environment. In this light, we will watch Alta Vista closely to see what kind of brand personality the site and service stake out as they develop.. At present, however, Alta Vista's plan to become the "aspriational" Internet brand still seems a bit vague to us. One final point: As Alta Vista pursues its growth strategy in the future, we believe that consumer advertising and marketing campaigns will become a necessary component of the tactical mix. Here, it might make sense for Alta Vista to enter into a major media company alliance in order to gain cost-effective access to traditional media advertising and placement exposure for the brand, as well as to the content resources of a media company. Either way, suffice it to say that Alta Vista will become a competitor to watch in the Online Media/Internet marketplace and we anticipate that today's announcements are not the last the market will hear from this new contender. We continue to recommend Yahoo! and AOL as the leading companies in the mass-audience Online Media market at the moment, as we believe that the advertising-driven profit gains that these companies can derive from their audience leadership in the new medium are not fully reflected in their share share prices.

To: SteveG who wrote (667)	2/3/1999 12:35:00 PM
From: SteveG	Respond to of 2902

just found while searching here that I hadn't posted BTAB's Andrikopoulos' comments (on FC) from a couple weeks back: from 1/21: --RAISING REVENUE ESTIMATES, ADJUSTING OPERATING LOSS ASSUMPTIONS: Our 1Q'99 revenue estimate increases to $27.6mm from $25.0mm on an operating loss per share estimate that goes to ($0.26) from ($0.23). Our CY'99 revenue estimate increases to $126.6mm from $115.0mm on an operating loss per share estimate that goes to ($0.92) from ($0.73). --KEY METRICS WERE STRONG: Average daily ad impressions delivered climbed to 177 mm from 108 mm (q/q) up 64% sequentially, DART customers climbed to 225 from 174 (q/q), and advertisers climbed to 2,300 from 2,200. --RISKS: Aside from the AltaVista risk (which we believe has been completely mitigated) we feel that DoubleClick faces two primary risks: (1) Uncertainty surrounding the overall interactive advertising market and (2) the management of hyper-growth as the Company continues to expand rapidly into new markets. DETAILS: COMPANY REPORTS SOLID 4Q RESULTS DoubleClick reported solid 4Q operating results before todays's market open. Revenues of $29.1 mm were well above our $24.0 mm estimate. Gross margins of 33% were in line with our estimates and an operating margin of -18% was significantly better than our -20% estimate. The Company's operating loss per share of $0.25 was in-line with our estimate and slightly better than the Street's consensus $0.26 estimate. Overall we believe the Company is executing well ahead of plan. DoubleClick continues its aggressive international expansion and its forays into higher margin products (e.g. DoubleClick DART and Closed Looped Marketing). We note that the Company has exceeded our revenue estimates every quarter since being a public company and has met or exceeded our bottom line forecasts as well, demonstrating its ability to deliver consistent and steady results. THE 1,000 POUND GORILLA HAS BEEN LIFTED--UPGRADING TO "STRONG BUY" FROM "BUY" We are upgrading our investment rating to "Strong Buy" from "Buy" based on three key points: 1) the Company's newly signed 3-year agreement with AltaVista, 2) the Company's ability to consistently deliver better than expected operating results and 3) DoubleClick's commitment to building its franchise through scaling its industry leading sales force and product development efforts. 1) The Company announced today that it has signed a 3-year advertising services agreement with AltaVista. We have consistently held that the main risk surrounding DoubleClick's story was its dependency on AltaVista (44% of 4Q revenue) and the ability of AltaVista to cancel the agreement with 90-days notice. We emphasize that the Company's new agreement with AltaVista is binding for the duration of the contract (i.e., it cannot be cancelled by either party). We believe that the investment community, including ourselves, has focused heavily on the AltaVista issue in the last 12-months. We feel now that the 1,000 pound gorilla has been lifted, investors will be able to focus on the tremendous growth opportunities that the Company should be able to capture. 2) The Company has delivered significant upside to our revenue estimates every quarter since becoming a public company. In 4Q DoubleClick delivered 21% revenue upside, posting impressive 40% sequential growth. We also remind investors that we have raised our revenue estimates four consecutive quarters, a sign that the Company continues to execute on new market opportunities. We highlight the Company's ability to grow International revenues to $4.1 mm from $2.5 mm (64% sequential growth), and believe this represents a solid indication that the International advertising markets could represent a larger opportunity (vs. domestic) longer-term. 3) We believe DoubleClick is committed to capturing increased market share and monetizing its growth opportunity by scaling its impressive advertising sales force. We further recognize the Company's dedication to developing cutting edge advertising technology tools. For example DoubleClick had the strategic foresight to develop a leading solution for advertisers (Closed Loop Marketing), when it had historically focused on solutions for Web publishers. We believe the Company is continually redefining its position within the interactive advertising industry and feel aggressive spending should enable it to distance itself from the competition. DoubleClick had 109 new hires in 4Q, of which most were in its sales force and development team. VALUATION--THE MARKET LEADER WITH A MAJOR CONCERN LIFTED DoubleClick stock currently trades at 8.7x our 2000 revenue forecast. If we apply our 10% long-term operating margin assumption to our $187 mm 2000 revenue forecast and fully tax it, we arrive at a current 142x 2000 TEMA (theoretical earnings multiple analysis) P:E multiple. This represents a 89% premium to our 75% 3-5 year revenue growth assumption. We are placing a 12-18 month price target of $140 on the shares of DoubleClick, which represents a 14x multiple of our 2000 revenue forecast and a 233x 2000 TEMA P:E multiple (211% premium to our 75% LTGR). Importantly, other leading Internet franchises such as Yahoo!, AOL, Amazon.com and eBay are 'currently' trading at premiums to their 2000 TEMA P:E multiples of 222%, 81%, 193% and 279%, respectively. We continue to believe that DoubleClick should represent a core holding for investors seeking solid exposure to the interactive advertising industry. In our opinion DoubleClick could trade higher, especially now that it has fully mitigated the AltaVista risk. RAISING REVENUE ESTIMATES, ADJUSTING OPERATING LOSS ASSUMPTIONS We anticipate continued revenue momentum, as such we are raising our revenue estimates across the board. We are, however, maintaining our mid-2000 break-even assumption. DoubleClick has demonstrated that it can maintain its leadership position in the advertising services market by launching new innovative services that are in demand by advertisers and publishers. As such, we believe that the Company will continue to invest heavily, over the next 24 months, in both product development and sales and marketing. We are adjusting our estimates as follows: New Old New Old EPS EPS Revenue* Revenue* ----- ----- ------- ------- 4QA 1998 UNCH. ($0.25) $29.1 $24.0 FY 1998 UNCH. ($1.13) $80.2 $75.1 1Q 1999 ($0.26) ($0.23) $27.6 $25.0 2Q 1999 ($0.25) ($0.21) $30.0 $27.0 3Q 1999 ($0.24) ($0.18) $32.0 $29.0 4Q 1999 ($0.17) ($0.10) $37.0 $34.0 FY 1999 ($0.92) ($0.73) $126.6 $115.0 FY 2000 (0.16) $0.00 $187.0 $175.0 * $ in millions ** Represents gross billings PRIMARY VARIANCES Higher than expected revenues were offset by incremental investments in product development and sales and marketing, a wise move in our view. Within operating expenses Product Development costs of $2.3mm were above our $1.9mm forecast as the Company invested in DoubleClick Local and Closed Loop Marketing. Sales and Marketing costs of $9.1mm were above our $7.8mm forecast as the Company rapidly expanded its sales force. General and Administrative costs of $3.5mm above our $3.0mm estimate as the Company incurred legal and consulting fees surrounding its follow-on equity offering. Overall, we are impressed that the Company continues to over deliver on the operating margin line (18% vs our 20% loss forecast), a sign that the model does scale. KEY METRICS WERE STRONG Average daily ad impressions delivered climbed to 177mm from 108mm (q/q) up 64% sequentially. We note that this sequential growth far exceeds Yahoo!'s 16% growth in page views and we remind investors that the Company now serves more ads per month than Yahoo! receives page views. The number of the DART customers climbed to 225 from 174 (q/q), a clear sign that the market is accepting DoubleClick's outsourcing ad serving solutions. Advertisers climbed to 2,300 from 2,200 and, importantly, the retention rate of $10,000+ advertisers remained flat at 92%, a sign that DoubleClick is delivering an attractive audience for potential advertisers. The Company's International revenue of $4.1mm (14% of revenue) reaffirms our thesis that international network sales is particularly fertile ground for DoubleClick given the rapid international expansion plans of U.S. Web publishers and the difficulty and expense of establishing independent international salesforces. The Company ended the quarter with $136.8mm in cash, up from $49.9mm last quarter as the Company completed a successful $86mm follow-on equity offering. NEW REVENUE RECOGNITION POLICY Under its new agreement with AltaVista the Company will be unbundling its services and charging AltaVista separately for U.S. DART, International DART, U.S. ad sales, International ad sales, Local ad sales and billing and collection services. The change in bundling structure for the AltaVista revenues has raised a GAAP issue that will require the Company to distinguish its gross revenue from its net revenue. What had been characterized as revenues historically will now be called "Billings". A new line item will be created called "Net Revenue", which is the portion of the "Billings" that the Company retains. We note that this accounting policy will only be applicable to the Company's AltaVista revenue. As such the difference between "Billings" and "Net Revenue" will be the portion of the AltaVista gross revenue that the Company remits back to AltaVista. For example in 4Q the Company's billings were $29.1mm, of which 44% was derived from AltaVista (or $12.9mm). DoubleClick retains approximately 30% of all AltaVista revenue (remitting the remaining 70% back to AltaVista). Therefore, "Net Revenue" for the 4Q would have been $20.1 mm (Billings minus 70% of AltaVista gross revenue). We emphasize that this accounting change DOES NOT effect the Company's gross profit or operating model. As a result of the accounting change gross margins, which will be calculated on the "Net Revenue" figure, should be in 48-50% range moving forward, as opposed to the current 33% levels. The Company will not restate historical financials as the new AltaVista agreement (which became effective on January 1, 1999) triggered the accounting change. We continue to believe that the Company can deliver a 9-10% long-term operating profit. RISKS Aside from the AltaVista risk (which we believe has been completely mitigated) we feel DoubleClick faces two primary risks: (1) Uncertainty surrounding the overall interactive advertising market and (2) the management of hyper-growth as the Company continues to expand rapidly into new markets. Within the interactive advertising market we believe the industry could experience CPM pricing pressure as AOL or other large players cut prices to sell more of their unsold inventory of impressions. We also see the potential for cyclicality in the industry and note that interactive advertising dollars could be the first area companies pare back in tough economic conditions. Finally we note that the entire interactive advertising industry is still in its infancy and that marketers are not fully convinced that the new medium has intrinsic value. This is particularly true in the consumer brand area where major advertisers (e.g. Unilever, Procter and Gamble) are just beginning to step up to the plate. We also highlight the risk of operational missteps as the Company continues to experience double-digit revenue and employee growth. We believe DoubleClick's solid management team and its combined extensive industry experience in advertising, publishing and technology mitigate this risk.

To: SteveG who wrote (667)	2/3/1999 12:44:00 PM
From: SteveG	Respond to of 2902

BTAB comments from 1/25: HIGHLIGHTS: DOUBLECLICK CONTINUES TO DEMONSTRATE FLEXIBILITY IN ITS NETWORK STRATEGY DoubleClick announced today that it will expand its services by opening its Network to highly branded Web sites on a 'non-exclusive' basis. We note that the Company's current Network is only comprised of 'premium' Web publisher clients that it represents in exclusive advertising sales relationships. Web publishers joining the expanded Network will now be able to place a portion of their advertising inventory with DoubleClick without becoming a 'premium' exclusive DoubleClick partner. As such DoubleClick should be able to scale inventory across a larger publisher mix in such content specific categories as finance, entertainment, sports and travel, thus offering its advertisers a broader audience reach. In an attempt to preserve the revenue streams of its current DoubleClick Network, the Company will launch DoubleClick Select in March, a Network that will focus entirely on its premium Web publishers it represents in an exclusive advertising sales relationship. We note that advertising buys across the non-exclusive Web publishers can only be purchased on a category basis, not on a site-by-site basis, thus maintaining the ad placement advantages currently received by exclusive Web publishers in the DoubleClick Network. Overall, we believe the Company's initiative to open its Network to 'non-exclusive' Web publishers should create incremental revenue opportunities for the Company by aggregating the excess advertising inventory of a broad base of clients. We feel DoubleClick's willingness to continually adjust its business model by adding innovative advertising solutions has been a key driver in establishing its leading market position. We are not changing our revenue or EPS estimates at this point as it is unclear when a material upside effect could be realized from these new initiatives. VALUATION We reiterate our 12-18 month price target of $140 on the shares of DoubleClick, which represents a 14x multiple of our 2000 revenue forecast and a 233x 2000 TEMA P:E multiple (211% premium to our 75% LTGR). Importantly, other leading Internet franchises such as Yahoo!, AOL, Amazon.com and eBay are 'currently' trading at premiums to their 2000 TEMA P:E multiples of 263%, 89%, 218% and 386%, respectively. We continue to believe that DoubleClick should represent a core holding for investors seeking solid exposure to the interactive advertising industry. In our opinion DoubleClick could trade higher, especially now that it has fully mitigated the AltaVista risk. We reiterate our "strong buy" investment rating on the shares of DoubleClick.