FTD Downgraded by Mark Mahaney (FTD)

Citigroup analyst Mark Mahaney on his decision to downgrade FTD Group (FTD) from Buy to Hold:

We are downgrading FTD from Buy to Hold on valuation and given we view rewards as now reasonably balanced against risks. We upgraded FTD from Hold to Buy on 5/1/06 based on several factors, incl.: 1) A recovery in consumer segment growth; 2) The development of a potentially material new revenue stream in Net advertising; and 3) An attractive 9% FCF yield. All of these factors remain in place -- and FTD's strong Mother's Day performance amplified the 1st factor; however, the FCF yield is now closer to 7% and the stock's ETR is now around 5%.

We have modestly upped our FY 06 (June ending) estimates in line with the company's revised guidance, though our FY 07 estimates remain unchanged.

Long-term risks facing FTD remain competition in the Consumer & Florist segments and ramping marketing costs.