Monday, September 11, 2006

Calls of Note Part 5

- RBC Capital note that over r the last few weeks, they have conducted a substantial number of channel checks to understand the near-term outlook for online advertising. Firm had expected to find some erosion in visibility for online media and marketing services companies as a result of lower consumer spending, in part due to higher debt burdens and gasoline prices. The findings were surprising -- firm's bearish expectation about the consumer appears to be wrong (or early), as consumer spending levels remain robust. The two exceptions appear to be in those categories directly related to real estate sales, and those categories directly exposed to rising fuel costs. Further, the outlook for online advertising, search, and marketing services companies remains very strong, with seasonal and secular trends far more pronounced than the impact of isolated areas of consumer weakness. Finally, back-to-school sales online appear to be very strong, with a strong August followed by an equally strong early September. Given this data, firm's favorite names are GOOG, AQNT, VCLK, and YHOO, in that order. TFSM is likely to report a solid quarter, but valuation gives them pause.

Firm also notes some slight acceleration (y/y) in volume of ads served during 3Q over a solid but seasonal 2Q. In fact, they believe 3Q ad volumes were ahead of 1Q levels for those providing ad serving technology, including AQNT.

Notablecalls: Will be watching AQNT following the call. Notice how the stock bounced from the key 200MA level on Friday? Also, while not mentioned in the call, AKAM may see some additional interest as much of the traffic goes through their systems. Nice chart too!

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