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DoubleClick warning uplifting

3 min read

DoubleClick (Nasdaq: DCLK)'s warning was a hit with analysts and investors.

Shares in the Internet marketing firm rose almost 15 percent Tuesday as the company's shortfall wasn't as bad as many people expected.

DoubleClick Shares were trading up 1.75 to 13.69.

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 firm First Call Corp., DoubleClick was expected to post a profit of 2 cents a share.

Many observers believe DoubleClick looks better than its peers, such as Engage Technologies (Nasdaq: ENGA), which reports earnings after the bell, and 24/7 Media (Nasdaq: TFSM), which is running low on cash.

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

But analyst Scott Reamer at SG Cowen Securities downgraded the stock to "neutral," noting that, like Yahoo! (Nasdaq: YHOO!), 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.

Reamer shaved numbers for the second time, cutting his fourth quarter estimate by $16 million, and his 2001 target by $125 million off of 2001. He now expects fourth quarter earnings or 3 cents a share.

The analyst said that though DoubleClick remains strong in the online advertising space, he is downgrading the stock because management indicated there are no catalysts that would change this weak media environment in the near term.

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

He said that while most weak numbers had been anticipated, he was "somewhat surprised by how weak Europe was and believe(s) this could be a big unexpected issue for YHOO (with 16 percent of YHOO's revenue coming from international)."

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

Doft dropped fourth quarter 2000 and calendar year 2001 Media revenue estimates to $57 million and $243 million, respectively. The ING Barings analyst said his new targets "reflect difficulties in the Media business," although DoubleClick's technology and data revenue estimates remain relatively unchanged.

The analyst also applauded management's decisions to cut costs and reduce headcount. Doft believes DoubleClick will reach sustained profitability by the second quarter of 2001.

Deutsche Banc Alex. Brown analyst Vivian Kuan kept a "buy" rating on DoubleClick, but also cut estimates again.

DoubleClick's warning was expected, Kuan said, but the conference call made the next two quarters look even tougher than the firm'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 "DCLK 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.