is one of the world's largest online marketing companies, but has
definitely fallen off the radar since its heyday. While
that may be true, we might not want to ignore this stock,
especially with call volume at 1000% of normal today. But let's see
what's really going on behind the curtain.
ValueClick provides branding solutions as well as traffic, leads
and sales solutions to its customers, among many other solutions
mostly geared towards web-based advertizing and
Their revenues are closely tied to search volume, CPC (cost per
click) and economic health. If companies like Google, Yahoo,
etc. are showing strong data, this will most likely reflect
positively on VCLK.
Fairly Bullish Pre-Announcement
On June 29th, VCLK announced updated expectations for this quarter
(Q2) and saw revenue coming in at the high end of their previously
expected range of $155- $160 million. Executives noted that VCLK's
Media segment was on target to meet or exceed prior guidance, but
there are still risks.
They also increased their share repurchase allocation by 100
million, which can certainly be viewed as a positive. We will
get full results from VCLK around July 28th (est). News data
and analysts' opinions are fairly bullish going into that
VCLK is a Zacks Rank #2 (Buy) and is currently trading at roughly
13 times earnings, which puts it more in the "inexpensive" zone
than one would think.
The Zacks Consensus Estimate is for the stock to earn 22 cents
in Q2; the most accurate estimate is also 22 cents, which gives
this stock an ESP of 0%. This essentially means that VCLK is
not expected to "wow" investors at their next report.
Although, the ESP of 0 is likely due to the fact that they
They have managed to beat consensus estimates by an average of
45.4% over the past 4 reports.
From my vantage point, VCLK is leaning bullish to neutral, with
its low stock price/valuation being the attraction here.
Normally ValueClick sees an average of fewer than 250 calls traded
per day across all of its strikes and months; yet today, almost
2600 calls had changed hands before noon.
The majority of the volume came in the August 19 calls where a
trader bought 2,120 options this morning. I know the trader
was opening a new position being that the open interest was only
49. I can also confirm that this was a buyer due to the
increase in premium (implied volatility).
The trade cost $53,000 with the options costing 25 cents ($25
each). The trader now controls 212,000 shares of stock, which
is substantial being that VCLK trade an average of 1.2 million
shares per day.
More importantly, this trader needs the stock to get to $19.25
by the third Friday in August to break even in the trade.
That equates to a 22% jump from the current price in less than 38
Sure it could happen, but based on my calculations, the chances
of VCLK getting to $19.25 are about 22%. The chance of it being
above that level on August expiration are about 9.5%
In sum, this is a low probability trade with one caveat that
could make the odds a bit better: earnings.
ValueClick will still report their numbers at the end of the
month. IF those results are exceptional, VCLK does have the
potential to move. In fact, the stock moved 30% (lower) last
At least one trader believes that this quarter may bring just
From my standpoint, VCLK looks fairly attractive here, and the
Zacks Rank #2 gives me confidence. While the option trade
instills assurance as well, I think I'd take a more conservative
approach and go with a longer-dated, slightly in-the-money option
to take a bullish position ahead of the report.
ValueClick is a good example of an option trade that falls in
line with a stock's potential; we will have to wait and see what
happens on July 28th.
Don't ignore the underlying trends in the option markets.
Options are often where the "smart money" does a great deal of
trading because they can operate with a certain degree of
Remember that this is not a guarantee of market direction, nor
should you go and fire off a trade without conducting your own due
diligence. I am simply breaking down the logic of the trade
and putting the pieces together.
Just because someone buys 5,000 call options, doesn't mean that
they are bullish on the stock. Those calls could be purchased
as a hedge to a very large short position or they could be only a
part of a bearish spread that the trader is "legging" into.
The trader could also be closing out an existing BEARISH
By combining options action with solid fundamental data like the
Zacks Rank, it helps stack the odds in our favor of targeting the
real direction and intention of the big volume option players.
Jared Levy is the Senior Equities Strategist for Zacks.com
and editor of the
Whisper Trader Service
VALUECLICK INC (VCLK): Free Stock Analysis
VALUECLICK INC (VCLK): Free Stock Analysis
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