Online behemoth Yahoo's (YHOO Quote - Cramer on YHOO - Stock Picks) disappointing announcement yesterday about its recent and future earnings will fall far short of expectations brought out just how cold this winter will be for companies that depend on online advertising.
The portal, one of the biggest sites for online advertisers,
cut back its estimates for revenue growth in coming quarters based on the continued weak advertising market. The
ripples from Yahoo's call on the next quarter spread over an industry that has already been dealing with the blows of a softening advertising climate.
While tech stocks were generally holding their own today -- they do seem to have become more immune to bad news over the past few months, don't they? -- ad-dependent online companies were feeling the Yahoo! fallout. Online ad specialist
L90 (LNTY Quote - Cramer on LNTY - Stock Picks) was off 2.7%.
Investors are clearly expecting to hear similar bad news from online ad agency
DoubleClick (DCLK Quote - Cramer on DCLK - Stock Picks) when it reports earnings after the close today. In recent trading, DoubleClick was down $1, or 8%, to $11.44. DoubleClick had risen 29.2% this week, ahead of Yahoo's announcement. But like most Internet-related companies, it trades well below its 52-week high. DoubleClick, which has dropped 89.5% since closing at $118.53 a little more than one year ago, is expected to be one of the survivors of an online advertising shakeout and may even get stronger.
The company has plenty of cash to make it through 2001 and could end up taking business away from its struggling competitors, said analyst Mike Legg of
Jefferies and Co. "Certainly there is market share to be grabbed," he said. Jefferies has no underwriting relationship with DoubleClick.
On the endangered list: Internet advertising firms
Engage (ENGA Quote - Cramer on ENGA - Stock Picks) and
24/7 Media (TFSM Quote - Cramer on TFSM - Stock Picks), said
Bank of America Securities analyst Chris Hansen. Engage recently reorganized, cutting its head count in half and closing down media offices so it could concentrate on software.
TheStreet.com recently reported on Engage's
staff cuts and
revamped practices .
"It's difficult to grow when you've cut half your people," he said. Bank of America Securities has no underwriting relationship with either Engage or 24/7 media. Analysts we spoke to said there is no news about Engage, and investors shouldn't expect any before its conference call to discuss earnings. Still, some investors sure see value. Engage was trading 24.3%. And 24/7 was adding 14.8%.
Yahoo's forecast helped get tech content company
CNET(CNET Quote - Cramer on CNET - Stock Picks) knocked down by
WR Hambrecht analyst Derek Brown and by
Robertson Stephens. Brown reduced his rating on the company to buy from strong buy and Robbie Stephens reduced the rating to attractive from buy. Both cited continuing weakness in the ad market.
CNET was down $1.42, or 10.7%, to $13.50 in recent trading.
John Raess
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