CIBC World downgraded DoubleClick to sector underperform.
Analyst Michael Gallant says he sees signs of price erosion in the core advertising serving business. He notes that DoubleClick's effective cost per thousand rate, excluding the eBay contract, was roughly 17 cents per share this quarter, down 18% year-over-year, and down 15% sequentially. Gallant says this is an alarming drop off in pricing, after only a mid-single digit decline in the first half of 2003.
Gallant notes as DoubleClick keeps targeting big customers, he's concerned the company will lose pricing power. He doesn't think the cost levels that DoubleClick utilized to keep margins in the third quarter represents a sustainable long-term strategy. Gallant raised the 10 cents 2003 earnings per share estimate to 11 cents, but cut the 29 cents 2004 estimate to 21 cents.