ANALYST WATCH: DoubleClick, Micromuse in spotlight

Micromuse Inc. (Nasdaq: MUSE) and DoubleClick Inc. (Nasdaq: DCLK) are both working to enhance the online experience, albeit in very different ways. After posting exceptional quarterly results this week, Wall Street is starting to take notice.

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DoubleClick, which has virtually cornered the market for online advertising solutions, is not a new name to those who've followed the mercurial rise of the Internet in the past few years. Some heady acquisitions and consistently improving financials have sent this stock through the roof in the past year.

This week, DoubleClick posted a smaller-than-expected loss in its fourth quarter, losing $3.1 million, or 3 cents a share, on sales of $93.7 million.

First Call consensus expected it to lose 5 cents a share in the quarter.

The $93.7 million in sales marks a 150 percent improvement compared to the year-ago quarter when it lost $4.1 million, or 4 cents a share, on sales of $45.7 million.

Leading Internet analysts didn't wait long to shower DoubleClick with accolades.

Piper Jaffray analyst Safa Rashtschy came out the next day with revised sales and estimates. He raised its fiscal 2000 estimate to a loss of 13 cents a share from 18 cents a share and bumped the revenue target to $557 million from $502 million.

Merrill Lynch's Henry Blodget was just as bullish, raising his fiscal 2000 revenue estimate from $500 million to $543 million and boosting its fiscal 2001 revenue target from $767 million to $804 million.

"Doubleclick reported a very strong fourth quarter, beating our estimates of revenue and revenue drivers across the board," Blodget said in a research note. "Media and technology revenue continued to grow faster than that of the industry-leader, Yahoo! and the market overall, suggesting that DoubleClick continues to gain share."

For the year, DoubleClick lost $55.8 million, or 51 cents a share, on sales of $258.3 million compared to a loss of $17.7 million, or 21 cents a share, on sales of $138.7 million in fiscal 1998.

It also added 198 new clients in the quarter, bringing its total to 1,050 publishers.

"We continue to believe that DoubleClick will be one of the long-term winners in the Internet advertising and marketing services industry, and the stock remains a core holding," Blodget said.

Of course, Blodget said many of these same things about Amazon.com Inc. (Nasdaq: AMZN) last year, only to temper his outlook when the online retailer continued to spend money and show few signs of reaching profitability in the near future.

It's not as if DoubleClick is going to turn the kind of profit Yahoo! has of late. Most analysts are expecting it to lose money through the first half of 2000, possibly eking out a slight profit by year-end.

Micromuse: A sleeping giant?

Micromuse is a little different story.

It sells software that helps Internet service providers and telecom carriers monitor their networks, ensuring that services such as email and Internet access don't crash.

And, unlike DoubleClick, this company makes money.

This week, it beat Street estimates by a penny a share, earning $2.5 million, or 13 cents a share, on sales of $22.3 million.

Not monster numbers, but a definite improvement from the year-ago quarter when it earned $1.3 million, or 8 cents a share, on sales of $10.8 million.

Its shares have rallied from 24 last January to around $173 a share this week and it announced a 2-for-1 stocks split.

Before you run away from a stock that's carrying a gaudy price-to-earnings ratio of 388, consider that Goldman Sachs picked it as one of its favorite stocks for 2000. And that was before its stellar earnings report.

CS First Boston analyst Wendell Laidley raised his 12-month price target to $253 a share from $174 a share and his fiscal 2000 earnings estimate from 62 cents a share to 63 cents a share following the earnings report.

He also reiterated his "strong buy" recommendation.

Full credit must be given to Bear Stearns analyst Bob Lam who upgraded the stock from an "attractive" rating to "buy" on Jan. 10. Perhaps Lam just got a little better guidance than Laidley.

Even more credit should be given to Merrill Lynch analyst Christopher Skilakes who started coverage of Micromuse with a near-term "accumulate" rating and a long-term "buy" when the stock was hovering around $60 a whack in early October.

All 11 analysts following Micromuse rate it either a "buy" or "strong buy."

If you have the stomach for a software stock trading at such a high P/E, Micromuse might be worth the risk.