Upgrade gives Lycos a lift

2 min read

Lycos shares rallied up 3 1/8 to 57 1/8 Thursday after Chase H&Q upgraded the Internet portal to a "strong buy" recommendation.

Chase H&Q analyst Paul Noglows said Lycos shareholders will enjoy a "near-term, price-appreciation" as its proposed $12.5 billion merger with Terra Networks (Nasdaq: TRRA) moves closer to completion.

The deal is expected to close by September.

Both companies have watched their stock prices erode in the weeks and months since the deal was announced.

In fact, Lycos (Nasdaq: LCOS) shares only managed a slight recovery in mid-May after it topped analysts' estimates by 2 cents a share in its third quarter.

In the quarter, Lycos pocketed $7.9 million, or 7 cents a share, on sales of $78.6 million.

Despite the solid earnings report, Lycos investors have been unnerved by Terra Networks' steady descent since the deal was announced May 16. The stock was trading around 53 1/2 at the time but has since fallen below 40.

At the time, Terra said would buy Lycos in a stock-for-stock transaction for $97.55 per Lycos share, or a total of approximately $12.5 billion in Terra stock.

At Terra's current price, Noglows said that Lycos shareholders still can expect to receive about $79.31 per share.

Terra Networks shares were up 2 7/64 to 39 Thursday afternoon.

Lycos shares hit a 52-week high of 93 5/8 in December after falling to a low of 28 9/16 in August.

Twelve of the 17 analysts tracking Lycos rate the stock either a "buy" or "strong buy."

Current estimates peg it for a profit of 7 cents a share in its fourth quarter.