/// The Bull Case for Demand Media–And Why Wall Street May Not Buy It [MediaMemo]

April 29, 2011  |  All Things Digital

There’s no debate that changes Google has made to its search engine’s ranking formula have taken a toll on Demand Media. How big a toll? That one’s up for debate: Richard Rosenblatt’s company says the changes, which affect the traffic that Demand’s sites get from Google, aren’t significant enough for the company to change its guidance. Most of Wall Street disagrees, and has been hammering Demand shares for the last couple of weeks. DMD is now trading around $16.70, down from a peak of more than $27 earlier this year. In a note published today, Stifel Nicolaus analyst Jordan Rohan argues that investors are overreacting (Stifel helped take Demand public in January), and keeps his “buy” rating intact. A worst-case scenario, he says, is that the Google changes will clip Demand revenues by 10 percent and EBITDA by 20 percent–but Wall Street has pummeled Demand much more than that. Rohan (and many others) are very interested to see what Demand says on its May 5 earnings call: EHow and Demand Media had a great deal of momentum all the way through the first quarter and into the second quarter

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The Bull Case for Demand Media–And Why Wall Street May Not Buy It [MediaMemo]

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