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DoubleClick stock gets lift from warning

Shares of the Net advertising giant rise 16 percent after a warning turns out to be good news compared to industry expectations.

Shares of DoubleClick rose 16 percent Tuesday after a warning turned out to be good news compared to industry expectations.

Shares in the online advertising giant closed up $1.94 at $13.88 on the Nasdaq Stock Market.

Stock price from December 1999 to present.  
Source: Prophet Finance
The company said it will report earnings in a range of a loss of 3 cents a share to break even for the December quarter. According to earnings tracking company First Call/Thomson Financial, DoubleClick was expected to post a profit of 2 cents a share.

But DoubleClick still looks a lot better than its peers, such as Engage, which will report earnings after the bell Tuesday, and 24/7 Media, which is running low on cash.

Most analysts maintained their "buy" ratings on the stock while lowering estimates for the fourth quarter and 2001.

More bearish analyst Scott Reamer at SG Cowen Securities downgraded the stock to "neutral," noting that like Yahoo, DoubleClick will be unable to escape the slowdown in dot-com advertising. He added that the suffering is expected to run its course through 2001, until which he will continue to rate the stock a "neutral."

Reamer shaved numbers for the second time, taking $16 million off of fourth-quarter expectations and $125 million off 2001. He now expects fourth-quarter earnings of 3 cents a share.

The analyst said DoubleClick remains strong in the online advertising market, with an aggressive young management team, exposure to multiple large, long-term advertising and e-commerce revenue opportunities, and a great underlying technology. However, he said he is finally ready to downgrade the stock because management indicated there are no catalysts to change the weak media environment in the near term.

DoubleClick's results could indicate more bad news for Yahoo, Reamer added.

He said that although most weak numbers were anticipated, he was "somewhat surprised by how weak Europe was and believes this could be a big unexpected issue for Yahoo," with 16 percent of Yahoo's revenue coming from international.

ING Barings analyst David B. Doft kept the stock at a "buy" but lowered estimates.

Doft dropped media revenue estimates for the fourth quarter 2000 and calendar year 2001 to $57 million and $243 million, respectively, to "reflect difficulties in the media business," but noted technology and data revenue estimates remain relatively unchanged.

The analyst also applauded management's decisions to rationalize the business and reduce head count, which should bring it to sustained profitability by the second quarter of 2001.

Deutsche Banc Alex Brown analyst Vivian Kuan also kept a "buy" rating on the stock and lowered estimates again.

DoubleClick's warning was expected, Kuan said, but the conference call made the next two quarters look even tougher than the company's already reduced estimates expected.

Kuan added that the "buy" rating is for "long-term investors only," and said the rating reflects a view that "DoubleClick will emerge from the dot-com shakeout with a solidified leading market position, and...(its) almost $900 million in cash and equivalents," or $7 per share.

Adams, Harkness & Hill analyst Kevin D. Wagner also maintained a "buy" while lowering estimates. He noted that lack of visibility for the stock extends well into 2001.