Moran believes the current stock price represents a great buying opportunity. Marchex will report on Tuesday August 8, after trading. He expects the results will be in-line with current street consensus (revenues of $32 million, OIBDA of $9.7 million and adjusted EPS of $0.11). This could result in a relief rally as some investors fear a miss.
The summer is the seasonally slowest period for Internet activity and Internet stock performance. We anticipate that this stock will begin to recover as investors turn their attention to the end-of-the-year holiday period, which will likely remind them that online, and especially search, advertising continues to grow rapidly.
Marchex is developing a local advertising network online through the integration of its zip code and direct navigation sites with its recently purchased open list local search engine. We believe that along with enhancements to its websites, the local orientation of many of the sites will drive growth over the next several years.
Marchex is a high-growth Internet stock trading at a nonilgrowth Radio multiple. Marchex is currently valued at only 11x 2006E OIBDA while mature, no-growth media assets like radio are valued at 10x. If the stock continues to languish, the analyst believes private-equity and/or other media companies may find it attractive.
His price target remains $25 per share. Recommends investors Buy MCHX at current levels.
Notablecalls: Looks like an interesting call.