Grab Getty Images at a Temporary Low

August has been positively brutal for Getty Images Inc. (NYSE:GYI); its second-quarter results came in lower than the Street expected and investors started fleeing, sending the stock price down from the mid $40s to the low $30s in a couple of days. Personally, I think the stock has been punished too much, and investors have a chance to grab this one at a temporary low.

To be sure, Getty faces problems. The main issue is that technology has greatly increased competition, and Getty hasn't yet figured out how to adapt to these changes. Between the proliferation of digital cameras, the emergence of payment sites that can be used by amateur photographers, and ever-improving search capabilities, it has become much easier and cheaper to find images on the web. While it's still by far the biggest company in the images business, Getty is not necessarily the first or last place people go to find images, and so its revenue growth has been declining.

Getty has started to adjust: it acquired iStockPhoto.com, a site that sells less expensive and less famous images, and it has also changed its licensing terms. Getty is also entering the music business with its acquisition of Pump Audio. Revenues are climbing at iStockPhoto, and Getty's acquisition of MediaVast, another image company, will also help boost its revenues going forward. CEO Jonathan Klein is a savvy manager who, with Mark Getty, revolutionized the images business once with the creation of Getty Images, and he may well be able to find a way to deal with these new adversities.

It remains to be seen whether Getty can return to the dominance it enjoyed before, but there will always be a demand for images, and I think Getty is due to regain at least some of the ground it has lost.

Type of Stock: The largest provider of images in the business, which is trying to adapt to new adversities caused by changing technologies.

Price Target: A recent Goldman Sachs report gave a 12-month price target of $40 (down from $47), while Deutsche Bank targeted $35 (down from $45). I think Goldman is closer to the mark; the second quarter really wasn't so bad and as the Street tempers its expectations, I think we'll see GYI's stock rise accordingly. But I'd only buy this below $32 to give yourself a chance to enjoy a real gain.

GYI 1-yr chart