Citigroup Smith Barney said CNet ( CNET) deserves to trade at 30 times next year's EBITDA and 40 times next year's free cash flow.

The brokerage upgraded the stock from underperform to outperform and set an $8 price target. "With the tech downturn and Internet ad slump stabilized, we are raising our 2004 revenue growth forecast for CNet from 10% to 20%," it said. "Cost controls should allow most of the upside to fall to cash flow and earnings next year."

Citigroup Smith Barney said the pricey multiples are justified because "according to our research, recent ad page counts at the leading technology magazines and at The Wall Street Journal show that technology advertising may have started to improve already."

"A shift in tech ad spending could provide a strong tailwind for CNet, in our view, as the company has staked out the dominant position in the technology news, information and shopping category on the Internet," it wrote.

The shares were recently up 95 cents, or 19%, to $5.85 on the Instinet premarket session.

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