Overture Services (OVER ) posted fourth-quarter results and issued guidance. SoundView upgraded its investment recommendation on the shares to neutral from underperform.
Analyst Jordon Rohan tells S&P MarketScope the company's guidance was directionally in-line with his negative view. He notes that traffic acquisition costs (TAC) were very high, pay-per-click growth flattish, and international losses accelerating. Rohan says Overture is in a difficult position, caught between revenue concentration of its two largest affiliates, competition of Google and other providers of paid search services. But after the 16% drop in the share price in after hours trading on Feb. 6, he thinks the valuation is reasonable. Rohan thinks the risks of Overture's business model are now much better diagnosed by the market. Positive catalysts could present themselves, he notes. The analyst cut his 2003 EPS estimate from 92 cents to 84 cents.