Why ReachLocal (RLOC) Stock is Skyrocketing More Than 170% Today

NEW YORK (TheStreet) -- Shares of ReachLocal (RLOC) are soaring 173.8% to $4.55 on heavy trading volume late Tuesday morning after Gannett (GCI) said it would buy the digital marketing company for about $156 million.

After yesterday's market close, the publisher of USA Today said it would pay $4.60 per share in cash for ReachLocal, which is nearly a 190% premium to its closing price on Friday.

"The acquisition of ReachLocal accelerates Gannett's digital growth strategy, adding more than $320 million of annual digital revenue, the best digital marketing solutions technology in the market, and an outstanding and well-respected management team to Gannett's digital business," Gannett CEO Robert Dickey said in a statement.

McLean, VA-based Gannett expects this acquisition to be about neutral to earnings per share in its first full year and modestly accretive in its second full year.

Jefferies maintained its "hold" rating and $17 price target on Gannett stock on Tuesday morning.

"GCI's ReachLocal buy for $156 million expands GCI's digital presence and establishes a path for the company to shift away from former parent, Tegna (TGNA)...GCI's ongoing M&A should continue to drive the narrative; however, we remain cautious on the core business," the firm wrote in an analyst note.

Separately, Gannett is also pursuing a takeover of Tribune (TPUB).

About 3.94 million of ReachLocal's shares were traded so far today vs. its average volume of 84,774 shares per day.

Shares of Gannett are declining 1.69% to $13.39 late this morning.

Separately, TheStreet Ratings Team has a "Sell" rating with a score of E+ on RLOC stock.

This is based on the dominance of unfavorable investment measures, which should drive this stock to significantly underperform the majority of stocks rated.

Among the areas the team feels are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.

You can view the full analysis from the report here: RLOC