Bloomberg News

Demand Media Falls on Analyst Rating Cut: Los Angeles Mover

February 09, 2012

Feb. 8 (Bloomberg) -- Demand Media Inc., an online company that runs websites such as eHow.com and LiveStrong.com, fell 6.5 percent after a downgrade by Morgan Stanley.

Demand Media, based in Santa Monica, California, tumbled to $5.93 at the close in New York. The stock has declined 11 percent this year. The company went public in January 2011, selling 8.9 million shares at $17 each in an offering led by Goldman Sachs Group Inc. and Morgan Stanley.

Scott Devitt, a Morgan Stanley analyst, lowered his rating to “underweight” from “equal weight,” according to a note. Changes to Google Inc.’s algorithms reduced Demand Media’s visibility in search results, leading to a drop in unique visitors, he wrote.

Demand Media began spending more on content late last year, Devitt wrote. Citing less traffic and higher costs, the analyst cut his estimate of annual revenue growth for 2012-2015 to 10 percent from 14 percent. Profit before interest, taxes, depreciation and amortization is estimated to grow 12 percent a year, down from 17 percent in a previous opinion.

Julie MacMedan, a spokeswoman for Demand Media, declined to comment on the downgrade. The company is scheduled to report earnings and its business update on Feb. 16, MacMedan said.

Some members of the company’s executive team also have departed. Executive Vice President Larry Fitzgibbon left the company effective Jan. 30, according to a filing with the Securities and Exchange Commission last month. Executive vice Presidents Joe Perez and Steven Kydd also left, MacMedan said.

--With assistance by Brian Womack in San Francisco. Editors: Jeffrey Tannenbaum, James Callan, John Lear

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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