Engage, 24/7 Media woes hurt online advertisers

Engage (Nasdaq: ENGA) and 24/7 Media (Nasdaq: TFSM) both crashed 36 percent Thursday after reporting disappointing quarters. Their dour results didn't bode well for DoubleClick (Nasdaq: DCLK) and other online advertisers.

Engage fell 1.19 to 2.281 in mid-morning trading following Wednesday night's warning that it will post a wider-than-expected loss in its first quarter and news its CEO is jumping ship.

24/7 Media was down 1.38 to 3.25 after it missed analysts' estimates, and announced it would lay off 200 employees and has only $23.1 million in cash left in its coffers in its third quarter report Wednesday.

Analysts' actions included downgrades for both stocks, as well as a bearish note for competitor DoubleClick, down 3.56 to 15.19, or 19 percent. NetCreations (Nasdaq: NTCR) was also down 14 percent or 1.09 to 6.81.

Engage Inc. (Nasdaq: ENGA) was downgraded to "neutral'' from "buy" by analyst Robert Fagin at Bear, Stearns & Co. analyst James J Pettit at Chase H&Q downgraded it to "market perform" from "buy."

24/7 Media was downgraded to "market perform" from "accumulate" by analyst Kevin D Wagner at Adams, Harkness & Hill. Analyst Steve Weinstein at Pacific Crest Securities downgraded shares to "market perform" from "strong buy."

Analyst J. Rohan at Wit Soundview, who reduced his rating to a "hold," significantly reduced revenue projections for the fourth quarter and 2001.

"We believe the slower revenue growth and high cash burn rate will make it difficult for the company to reach its stated goal of profitability in the fourth quarter of 2001," Rohan said in a research note.

Rohan also issues a bearish note on DoubleClick.

"While we have indicated that we think DCLK is attractively valued at its current trading range, we believe (24/7's and Engage's) announcements will have a negative impact on the entire online advertising industry," Rohan stated.

"One could argue that DCLK could benefit from weakening competitors, but we think that these announcements serve as a validation that the entire industry is in fact worsening. Moreover, we have seen initial indications that online advertisers are experiencing minimal fourth quarter improvement despite favorable seasonal trends."

• 24/7 Media misses 3Q targets, lowers outlook and cuts 200 jobs
• Engage warns of 1Q shortfall; CEO resigns>