Ahead of the Bell: Analyst scrutinizes ValueClick

ValueClick Inc.'s first-quarter results raises several questions about the Internet advertising company's business model and earnings quality, an analyst said Wednesday while encouraging investors to stay on the sidelines.

Merriman, Curhan, Ford & Co. analyst Richard Fetyko noted that while ValueClick's media and affiliate marketing units missed expectations, a one-time traffic boost from the comparison shopping unit compensated and raked in about $5 million in revenue.

"The mystery of this one-time source of traffic and timing raises questions about the source of traffic for all of the comparison shopping segment," Fetyko said in a note to clients.

Overall, income rose 3 percent in the period and revenue rose 12 percent during the period.

Fetyko kept a "Neutral" rating on the Westlake Village, Calif.-based company.

Piper Jaffray analyst Aaron M. Kessler kept a "Buy" rating, despite the performance of several business units, but did lower his price target to $26 from $28.

The new target implies he expects the stock to rise about 27 percent over Tuesday's $20.48 close.

Based on the quarterly income boost, Kessler raised his 2008 estimates to earnings of 80 cents per share on revenue of $733 million, compared with a previous estimate of 77 cents per share on revenue of $732 million.

Analysts polled by Thomson Financial expect, on average, earnings of 79 cents per share on revenue of $739 million.