Yahoo! (YHOO) buying Right Media.
The advertising land grab is here, and when the dust clears every company in the online advertising space is going to be acquired by one of the big four: Yahoo!, Google,
. And others, such
, might step up as well. It's a great time to be in online advertising.
First off, current valuation methods almost don't matter. I hate to say this because it brings back memories of 1999, but right now companies like Google are buying for the far future, a future where all media has an online component and technology is the intermediary between advertisers and content across all the media.
That's why Google paid $3 billion for Doubleclick, a full 50% more than the price Microsoft was rumored to be paying just a week earlier, and that's why Yahoo! is paying $640 million for the 80% it didn't own of Right Media, only a few months after it paid $45 million for a 20% stake.
I set up
to look at the companies that I believe could be next.
is in the running. The company handles every aspect of an online advertising campaign, from banner ads to email marketing to lead generation. Back in 2001, both ValueClick and DoubleClick were trading for less than the cash they had in the bank, and were even shorts at that point as they both continued to trade lower until 2003.
Now they are the darlings of Wall Street, and Valueclick is almost certainly next on the seller's block. Analysts expect earnings to be 81 cents per share this year, up from 62 cents in 2006. With a forward P/E of 30, it's not unreasonable at all, and I can easily see it fetching $4 billion from a company like Microsoft, which would be a 30% premium from where it is now. Also, two of my favorite mutual funds own ValueClick.
tends to own companies trading below cash until their intrinsic value is reached. Apparently it does not feel that ValueClick's intrinsic value has been reached. The fund has had a 16% annual return since it opened in 1998.
is run by Jim Oberweis, a columnist for
. Stockpickr follows his main picks.
Also, ValueClick is on the list of
Make Time for 24/7
24/7 Real Media
( TFSM) is next in line. 24/7 competes with Doubleclick in the advertising space and was the No. 2 player through the 1990s, right after DoubleClick and side by side with
( CMGI) Engage Technologies, which went out of business. 24/7 survived and has $50 million cash in the bank and cash flows of $15 million and growing.
Analysts are giving the stock a forward P/E of 15, and I can easily see it fetching up to $1 billion in a sale. But the current market cap is $577 million, and I see a sale to be more likely in the $700 million to $800 million range.
Interestingly, Stockpickr member Sesha has 24/7 in his
, a list that was set up on Jan. 22 and also includes biotech play
There are a crop of online marketing agencies, analytics companies and the leader in email marketing. For the full list of 10 plays that could be next to be taken over in the online ad space, plus analysis of who I believe gets acquired next, check out the
I set up on Stockpickr.
I will be updating this list as I research more companies in the space and more news is known about the companies involved. To get email updates of when the list is updated you can bookmark a portfolio by rating it with four stars. Also, we are indexing all blog posts and videos that mention any of the companies on the index.
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.
James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
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