Analysts Finally Defend Bankrate

| About: Bankrate Inc. (RATE)

I’ve been waiting for the Wall Street analysts with $40ish price targets on Bankrate (NYSE:RATE) to come out and defend the stock, which has fallen 30% over the past week due to concerns on further display advertising pullback and the near collapse of the credit card business.

Citigroup Internet analyst Mark Mahaney did just that on Friday by lowering his price target on the stock to $33 from $41, but maintaining his buy rating on the shares. The analyst lowered his ’09 revenue and EBITDA estimates by 9% and 12% to $169 million and $60 million, respectively. His ’09 Adjusted EPS falls to $1.42 from $1.66. His ’10 EBITDA was cut by 11% to $73 million.

The analyst admits he was wrong in being too early in calling the bottom in the display advertising business (approx 20% of revenues) and being too optimistic about the credit card business (20% of revenues), which has hit a wall. However, he remains positive due to: 1) valuation, with RATE trading at 5X '09 EV/EBITDA - a trough multiple for RATE & one that is attractive versus his long-term 10% EBITDA growth outlook; 2) RATE's consumer finance diversification strategy (Mortgage, Deposit, Insurance, Credit Card) provides a balanced long-term growth platform; 3) RATE is being hit by Macro factors - not competitive issues - he sees RATE as a long-term share gainer; and 4) he views management as one of the best among Internet Small Caps.

I’ve been sounding the alarm bells on this stock for quite some time (Final Option for RATE: Find A Buyer) and thought that the majority of the analysts were wrong in their analysis on the stock. I ended up being right; however, I thought the stock would bottom at $20. Thus, I was too early in buying the shares (Good Entry Point).

However, I think the shares were oversold last week and believe that significant upside remains at this levels. So I agree with the analyst on his reasons for staying positive on the shares and would buy on the weakness.