Fastclick, first ipo in a few weeks, getting a lot of positive press. Personally I like them more when they come out below the radar but with the dearth of offerings that's not likely to happen for a bit.
Online advertising/marketing. I've not liked this sector in years for 1 big reason. For 6 years now I've made my living online, spending 50-60 hours on the internet per week and I find online ads intrusive/annoying, not to mention the countless cookies from these companies I'm cleansing from my cache weekly. Unlike many other mediums I've yet to see one online ad or ad campaign that wasn't ignorable at best and overwhelmingly annoying at worst. pop-up blockers have pretty much stopped that ridiculous advertising method and the upcoming version of IE will block pop-under ads, which account for roughly 1/2 of FSTC's revenue.
In my opinion search is THE current/future of online advertising/site drivers, not the traditional pop-up/under ads. I do click on google advertisers occasionally as they show up to the right on the topic I'm already searching for. much cleaner/much more effective method of internet advertising. I firmly believe that while flashy site ads may not die, they will wither as a driver.
and that is fstc's biz....although they've spent quite a bit of $$$ past year to shift towards paid search optimization, they do seem a bit behind the game there as vclk has rolled out their search optimization system recently. I'd really like to see how fstc's search optimization engine performs for a few quarters, but we don't get that luxury here---the potential for the product is there, although it appears google just purchased a company that will allow them to offer 'search optimization on their site.
the good: nice growing top-line revenue exactly what you're looking for in an ipo. profitable, about 50 times trailing earnings, $4 in cash. these guys have been around awhile and thru the growth can tell they're good at what they do. margins are thinnest in the biz and they slashed those in '04 investing in their search optimization service, which they'll roll out in mid year. their system works, question now is can they shift over to search and grab share there, essentially competing against the portals own optimization products---it's a tough road there, I'd rather own yahoo at 55 trailing earnings to be honest.
the so-so: the slow shift to search, vclk their closest competitor trading at a lower '05 pe to fstc, although fstc's growth in top-line should be 30% or so compared to vclk's 20%. sales/marketing rose ea bit in '04 as % of revenues, something I don't like seeing, went from 7 1/2% of revenue to nearly nearly 8 1/2% folding out a one-time event hurt their bottom line by 5 cents or so in '04, and that's folding out the one time charge in that line.....and for a company that earned roughly 25 cents per share, that's significant. g/a and technology as % of revenue also grew in '04, this could be an issue going forward, they'll need to get a handle on this, I don't like seeing expense % increases across the board on an ipo, can indicate management that doesn't really have control on their growth- something to keep an eye on in future releases.
these guys are good at what they do, online advertising/marketing. It's a shifting/growing business and the big undetermined question is can fastclick slide over to 'the future', and that's search related. in my opinion they're coming pricey to the sector based on their margins and that they've yet to roll-out their new search optimization service, which I imagine will need to be fasclick's top-line revenue driver 1-2 years from now. factor in the positive attention, it's internet related and the potential pricing/opening premium, it's quite risky. My feeling is they'll have to adjust their pricing structure radically and it's too soon to determine the results there as the product that will need to lead them into the future isn't out yet.
I like the top-line growth quite a bit here, but there are some serious question marks and that it's coming at a premium to sector at 12-14, it will be very pricey at the probable 15-17 open. this is a small solid company in a growing tough sector, at a discount it's worth a shot, at a pumped up pricing/open I'll pass. they're the small lower margin player in the biz, should be hitting at a big discount, surprised at the pricing structure here, think this should be a $8-$10 sort of offering, not a $12-$14. search/search related/online transactions related the spot to be in internet imo, not so much the 'traditional' online advertisers/marketers. fstc is moving in that direction, again I'd be very interested in this one at a sector discount, not so much at the premium due to it's small size, lower margins and growing expense ratio.
will update based on pricing.