aQuantive: Advertising prowess on the web

Online marketing is a hot topic, but the Internet is a specialized medium and success in that arena requires expert help. One of the industry's best known practitioners is headquartered in Seattle, Washington.

aQuantive Inc. (NASDAQ: AQNT) is a digital marketing services and technology company, which aims to help clients acquire, retain and grow customers across all digital media. Its Digital Marketing Services division provides Web site development, interactive marketing, creative development and branding. The Digital Marketing Technologies unit offers advertisers online campaign management, search engine marketing and Web site optimization tools. The Digital Performance Media segment buys blocks of online media advertising to resell on a targeted basis. The aQuantive client list includes Adobe Systems Inc. (NASDAQ: ADBE), Kellogg Co. (NYSE: K), McDonald's Corp. (NYSE: MCD), Pepsico Inc. (NYSE: PEP), Procter & Gamble Co. (NYSE: PG), Nike Inc. (NYSE: NKE) and Walt Disney Co. (NYSE: DIS).

The firm became the object of acquisition speculation, after Google Inc. (NASDAQ: GOOG) and Yahoo! Inc. (NASDAQ: YHOO) recently strengthened their respective Web positions by purchasing aQuantive digital marketing rivals. Client Microsoft Corp. (NASDAQ: MSFT) has been mentioned as a possible suitor.

That news popped the shares last month. They lost some of the gain though, falling back to 30-day moving average support, just before the company's quarterly report.

Management then announced Q1 EPS of sixteen cents and revenues of $142.6 million. Analysts had been looking for nine cents and $122.6 million. The firm also guided Q2 revenues to $148-153 million ($138.15M consensus) and FY07 revenues to $595-$615 million ($570.28M consensus). Four brokerages subsequently reiterated their "buy" ratings on the issue and boosted their price targets to the $37-38 range.

The issue popped again and then moved into a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, the brokerage community now recommends the shares with five "strong buys," 14 "buys" and six "holds." Analysts see a 32% growth rate, through the next year. The AQNT Price to Book ratio (4.52), Sales Growth rate (54.66%), EPS Growth rate (60%), Operating Margin (17.99%) and Net Profit Margin (12.30%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the AMEX Internet Index. Over the past 52 weeks, it has traded between $19.56 and $35.43. A stop-loss of $29.90 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.