Alloy surges on upbeat earnings

Shares were up $1.05 to $11.80 in early morning trading.

Alloy posted a net loss of $10.3 million, or 49 cents per share, for the first quarter, with revenue of $28.2 million. Excluding charges for goodwill amortization, stock-based compensation and noncash items, it recorded a pro forma loss of $4.3 million, or 20 cents per share.

Analysts were expecting the New York company to record a pro forma loss of 22 cents per share, excluding the goodwill and other charges.

Alloy officials also told analysts and investors Wednesday to expect 2001 revenue figures to be at the high end of the previously predicted $140 million to $145 million range.

Alloy markets to the "Generation Y" set, selling through the Internet and through catalogs. The company recently announced its acquisition of Carnegie Communications, which provides information about college applications to high-school students through various publications and Web sites.

While many retailers have felt the pinch of a weaker economy, teenagers shopping Alloy's sites and catalogs are apparently not concerned, and have continued to spend their disposable income.

Analysts cheered the results. "The revenue strength further validates the spending propensity of the teen demographic, which continues to be vigorous despite the broader slowdown in the economy," wrote McDonald Investments analyst Sasha Kostadinov, who reiterated a "buy" rating and $20 price target for the stock.

USBancorp Piper Jaffray analyst Jeff Klinefelter raised his fiscal 2002 earnings estimate to 3 cents per share from 2 cents, and issued new earnings and revenue estimates for fiscal 2003 of 52 cents per share and $222.1 million, respectively.

"The spring/summer selling season is off to a good start, as management indicated that it has not felt the effects of a slowdown due to either weather or the economy," said Klinefelter.

Analysts also praised the company's ability to boost advertising sales in a tough economic market, and noted that its marketing database "grew nicely" during the quarter, reaching 7.1 million accounts.

"We believe Alloy's continued momentum in sponsorship revenue highlights their unique hybrid platform, which allows the company to sign deeper, longer-term deals with existing sponsorship partners (i.e. Clairol, M&M Mars) and to attract new advertisers, such as Nestle, Sprite, Timberland, Universal Pictures and Paramount, seeking to reach the Gen Y demographic," Robertson Stephens analyst Lauren Cooks Levitan wrote in a research note.

Levitan maintained her "buy" rating on the stock, and a $15 stock price target.