UPDATE: Stifel Nicolaus Cuts PT to $14, Maintains Buy on Demand Media; Search Woes Overinflated
Stifel Nicolaus reiterated its Buy rating on Demand Media (NYSE: DMD) while reducing its price target from $15 to $14.
Stifel Nicolaus noted, "Yesterday we hosted Mel Tang, CFO in NYC. DMD's stock was down 6.5% on a competitor downgrade asserting incremental Google risk due to search arb tactics. We believe this assertion is incorrect. Paid traffic (SEM) is roughly 1% of gross revenues and less than 1% of traffic. Two other key takeaways as we tweak our model 1) The YouTube content deal expires at the end of 1Q, we had previously assumed a renewal ($5-10mn of annual network revs), we have stripped that from our model. 2) gTLD initiatives remain difficult to model. We have assumed no incremental gTLD revenue or associated expense beyond company's guidance."
Demand Media closed at $8.63 on Tuesday.
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