Goldman Sachs Downgrades Demand Media (DMD) to Sell, Citing Keyword and Googld Risk

December 4, 2012 7:17 AM EST
Get Alerts DMD Hot Sheet
Price: $6.35 --0%

Rating Summary:
    8 Buy, 7 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Goldman Sachs downgraded Demand Media (NYSE: DMD) from Neutral to Sell with a price target of $9.00 (from $12.00).

"Demand Media has proven vulnerable to changes made by Google in the past, the Panda algorithm change in 3Q11 the most significant example driving owned and operated content revenue down 3% yoy in 1Q12," the analyst comments. "In 3Q12
and more significantly in 4Q, DMD began a traffic driving strategy to eHow search pages, which could yield a near-term increase in traffic that we view as unsustainable longer term. DMD’s O&O properties represent roughly 50% of net revenue and eHow representing 46% of total traffic, according to comScore, has been a contributor to growth with traffic accelerating to +35% yoy in 3Q. With competition increasing for keywords, and paid traffic apparently responsible for much of the acceleration in growth we’ve seen in recent quarters, we believe revenue estimates for 2013 are too high."

For an analyst ratings summary and ratings history on Demand Media click here. For more ratings news on Demand Media click here.

Shares of Demand Media closed at $9.23 yesterday.

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