Wedbush Morgan downgraded InfoSpace (INSP ) to hold from buy. On Monday, the company agreed to sell its Payment Solutions business to Lightbridge (LTBG ) for $82 million.
Analyst Scott Sutherland says the downgrade is based on valuation and expected dilutive effects from the sale of Payment Solutions. While he expects the deal to up InfoSpace's balance sheet by $384 million in cash, or $11.74 per share, he also believes revenue and EPS estimates will be reduced once the deal completed, as Payment Solutions was profitable.
Given this concern, InfoSpace's premium valuation, and certain business model risks, he downgrades the stock to hold. However, he kept a $35 price target, and estimates of 66 cents 2004 EPS on $200 million in revenue, and $1.08 2005 EPS on $236 million in revenue.