10 marzo 2009 / 11:23 / 8 anni fa

REFILE-BUY OR SELL-Is $17 a good rate to buy Bankrate?

(Refiles to correct date in dateline)

By Tenzin Pema and Anurag Kotoky

BANGALORE, March 10 (Reuters) - Bankrate Inc RATE.O shares have lost about half its value since the financial information-based website operator posted a 34 percent drop in fourth-quarter profit early last month.

Bankrate shares, which closed at $17.02 Monday, trade at about 10.16 times average analyst earnings-per-share estimate for fiscal 2009, much below the 23.09 times average for the sector for the same period.

Valuations also appear cheap when compared with other companies that depend on advertising revenues.

Bankrate shares trade below the 24.33 times average 2009 per-share profit estimate for Internet media company IAC/InterActiveCorp IACI.O and far below that of Yahoo Inc YHOO.O, which trades at 34.34 times estimated 2009 earnings.

So, does this relatively low valuation mean that investors should view Bankrate shares as a buying opportunity? Or should investors brace themselves for more downside from current levels?

Will the problems in the company's display advertising and credit card businesses continue to dampen outlook and hurt the stock's performance, or is there a recovery in sight?

STILL A BUY

An analyst at Citigroup believes the stock is still a "buy."

Currently Bankrate shares trade at five times Citigroup's 2009 earnings before interest, taxes, depreciation and amortization (EBITDA) estimate, which is a trough multiple for Bankrate and one that is attractive, Citigroup analyst Mark Mahaney said.

Mahaney believes the stock is being hit by macro-economic factors, not competitive issues, and expects Bankrate to be a long-term share gainer.

"An improved macro environment -- specifically, a sustained decrease in mortgage rates and increased refinancing activity, along with stabilization in Bankrate's credit card lead-generation and display advertising segments -- can lead to multiple expansion for Bankrate shares," Mahaney added.

The analyst has a $33 target on the shares.

Until early last month, Bankrate shares rose as analysts said the company stood to gain from a volatile market as more and more investors turned to its website for free and reliable information on various financial products.

However, problems in the display advertising and credit card businesses have lowered earnings visibility for the company.

"The company has some headwinds and tailwinds, but overall seems well positioned to benefit from the uncertainty in the financial sector, stirring up traffic to Bankrate.com and other financial services," Merriman Curhan Ford analyst Richard Fetyko told Reuters last month.

MORE DOWNSIDE LIKELY

An analyst at Credit Suisse did not seem too optimistic on the stock and thinks investors should stay on the sidelines.

Credit Suisse's John Blackledge believes there is room for more downside to shares from current levels, which he noted was "very low" compared with historical levels.

"In this environment, with numbers probably coming in further with the Street being too high and the general lack of visibility, I think its hard to find a real catalyst for the stock," Blackledge said by phone.

In a note to clients last week, the analyst said he expects continued near-term weakness owing to weak display advertising, limited visibility for 2009 and declines in the credit card business, which generates about 20 percent of total revenue.

"We have been concerned about the credit card segment heading into 2009, given expectations for more stringent approval process, fewer credit card applications and issuer consolidation," Blackledge said.

On Feb. 5, Bankrate said it would not give outlook for the year. But later that same day, the company, in a conference call with analysts, said it expects lower growth levels in its EBITDA, compared with its performance in the past four years, unless display advertising improves.

Bankrate follows the "pay for performance" advertising model, in which advertisers pay for the actual hits.

"First half of 2009 is going to be tough on them on the display side and you may see a levelling off at the back half of 2009," Blackledge said.

He expects 2009 display advertising revenue to be down 17 percent at $25 million, on a year-over-year basis, as large financial institutions pare back marketing spend.

Struggling banks and other financial companies are now limiting their marketing spend as part of cost cutting measures to deal with a deteriorating economy. (Editing by Anil D'Silva)

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