Wall Street has been abuzz with industry rumors since Google's (Nasdaq: GOOG ) $3.1 billion deal for DoubleClick. The chatter indicates that one of the prime targets for a potential buyout is 24/7 Real Media (Nasdaq: TFSM ) . According to its earnings announcement last week, the company hired Lehman (NYSE: LEH ) to deal with "strategic" issues -- a sign that it's thinking of selling out.
Over the past 10 years, 24/7 has built a full-featured online advertising platform. Through key partnerships, the company has leveraged its technology into growth areas like Europe and Asia.
In fiscal Q1, 24/7 posted a 34% increase in revenues to $57.7 million, while net income improved from a loss of $7.5 million to a loss of $56,000. Cash flow from operations was about $8.1 million.
The company upped its full-year revenue guidance from between $255 million and $265 million to between $265 million and $275 million. Earnings should range from $0.52 to $0.55 per share.
Strength in Asian markets has been a key growth driver, and the DoubleClick deal has also improved 24/7's fortunes. Since some of DoubleClick's customers may fear Google as a competitor, they might take their business to alternative advertising networks. According to the 24/7 conference call, the company has ramped up its marketing expenses to attract these customers, and the effort appears to be working.
Since the DoubleClick announcement, 24/7's stock has surged 29% to $11.05. Yet its valuation, at 1.9 times revenues, still looks cheap relative to its peers. aQuantive (Nasdaq: AQNT ) trades at 4.0 times revenue, and ValueClick (Nasdaq: VCLK ) at 3.7.
This is not to imply that 24/7 won't be volatile. In the past month alone, it became entangled in buyout rumors involving Microsoft (Nasdaq: MSFT ) and WPP Group (WPPGY). That's no surprise in light of the DoubleClick deal, not to mention Yahoo's (Nasdaq: YHOO ) recent $680 million acquisition of 80% of Right Media. These are all signs that the growth in online advertising should continue apace, and that online players like 24/7 are becoming highly valued strategic assets.