This Might Be Trouble For Zynga Inc (ZNGA) & Groupon Inc (GRPN)

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What is Worth Buying?

In sharp contrast to lofty valuations extended to the above mentioned companies, ValueClick Inc (NASDAQ:VCLK) represents a group of online players that are profitable, have vastly scalable business models, and yet trade at attractive prices. This digital marketing services company beat Street expectations during first quarter results, but the stock tanked on conservative guidance. After the results, its price came down from $30 to $27, valuing the company at an earnings multiple of 22. This falls to an attractive 12.9 on a forward basis, which looks even better when seen with a debt equity ratio of 0.24. It is also heartening to see the company increasing its share repurchase program by $61 million. This is an indication that the company believes its stock price is undervalued.

Foolish bottom line

On a whole, it may not be time to rush to buy these stocks just because activists have gone long on them. This is especially true for Zynga Inc (NASDAQ:ZNGA) and Groupon Inc (NASDAQ:GRPN), as the downside has become quite big after their recent recoveries.

The article Activists May Be Trouble For Zynga and Groupon Shareholders originally appeared on Fool.com.

Jacob Wolinsky has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Jacob is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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