Amazon (AMZN) was remarkably quiet at this one, although we did note at least one AMZN person from the merchant services biz making the rounds. We did some digging in merchant services and came out of the show more negative on that part of AMZN’s business. As many will recall, AMZN announced a host of new services deals last April (Marks & Spencer, bebe, DVF.com, Sears.ca) but to our knowledge none of these sites have gone live. So we endeavored to find out why.

Yesterday, MNST issued a statement that a committee of independent directors has been conducting an internal review of all stock options grants issued by the Company. The committee has retained independent outside legal counsel to assist in this matter.

Google and Dell recently announced a major distribution deal. Reportedly, Dell will install on all its Business and Home PCs the Google Toolbar and other applications, in addition to making the default homepage a co-branded Dell-Google homepage. Unfortunately, very few other details have been disclosed.

We continue to recommend buying NILE at these price levels. Our positive bias to the shares hasn’t changed since March quarter earnings. In terms of intra-quarter datapoints, we would highlight the following:

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.

1. Microsoft has substantially increased its focus on Internet advertising and search engine advertising in particular : According to Matt, MSN’s R&D budget for FY07 will reach $1.1B, up from $700MM in FY06. Further, there has been a 35% increase in staffing at MSN since September. And finally, MSN will spend $700MM in capex in FY07, up from $300MM in FY06. (Separately, Matt stated his belief that Microsoft’s Internet management team is now “A” league.)

We are lowering our EXPE PT from $20 to $17. No change to our estimates, but our detailed review of sector fundamentals necessitated a revaluation of our EXPE valuation framework. Among the large- and mid-cap Internet stocks under coverage, EXPE is the only company with a material negative EPS outlook for 2006. Specifically, our estimates -- which are generally in-line with the Street -- call for a 16% Y/Y decline in EXPE's 2006 adjusted EPS. This implies far and away the weakest 2006 outlook fundamentals in our group.

Accordingly, we have lowered our 2007 valuation multiples from 17X to 15X (on a P/E basis) and from 10X to 8X (on an EV/EBITDA basis) to achieve our new PT of $17.

Despite the deteriorating fundamentals, the factors that keep us at a Hold rating here include: 12% FCF yield, a 20MM share buyback, secular growth in online travel, and leading brand & marketshare in North America (around 45%).

EXPE's Weak Current and Outlook Fundamentals Vs. Select Peers

The median M/M change in Short Interest for the stocks we cover was up 2.8% (vs. up 2.4% in April). The biggest M/M changes were: GOOG (down 42%), FTD (up 26%), EBAY (up 14%), and CNET (down 13%).

NILE, ADBL, WBMD, PCLN, and RATE had by far the highest Short Interest Ratios among the stocks we cover. And ADBL, NILE, RATE, NFLX, and WBMD, had the highest Short Interest as a % of Float. These two measures indicate relatively high levels of negative sentiment with these shares.

May Net Short Interest With M/M and Y/Y Change:

...to mutually benefit both companies by better serving their user, merchant, and advertising communities in the U.S. The agreement consists of four major components in the areas of search and graphical advertising, online payments, a co-branded toolbar, and the opportunity to explore "click-to-call" functionality.

FTD disclosed this morning that total consumer orders were up 12%Y/Y during the Mother's Day season. For context, total consumer orders were up 9% Y/Y during the Mother’s Day season in 2005 and 6%Y/Y in Q1:06.

CNET shares are off 36% year-to-date and off approximately 30% from when the company reported a disappointing in-line & lower March quarter. The March quarter results and outlook made us incrementally more cautious on the name – but not 30% more cautious. We lowered our estimates and price target at the time. With this upgrade we are changing neither our estimates nor our price target. For context, our 2006 estimates -$389MM in revenue, $90MM in EBITDA, and $0.21 GAAP EPS- are within management’s guidance, but modestly below the Street at $395MM, $91MM, and $0.22, respectively. Part of our call here is that the recent very sharp decline in the shares represent significant skepticism in management’s current guidance and in current Street estimates.

1) The search engine "fix" is on track for H2:06 rollout (as expected) – Yahoo! has been working on a new search platform (code name Panama) for quite some time. Per our Analyst Day preview note, we view this search engine “fix” as probably the most important R&D project for Yahoo! Among the large cap Net stocks, it’s hard to identify a catalyst as fundamentally important to a company as “fixing” its search engine is to Yahoo! During the analyst day, Tim Cadogan (VP Search) presented a detailed roadmap on Project Panama in terms of key priorities & timelines.

1. eBay and Amazon remain the #1 and #2 Web retail destinations. This has been the case for as far back as we can track. In April, eBay had 44% reach (54% for retail) and for Amazon the reach was 28% (34% for retail). Note that in April 2005, eBay’s reach within the retail vertical was 39%, while Amazon’s reach was 30%. What’s interesting here is that Amazon’s reach – which unlike eBay, is not materially impacted by acquisitions – has increased Y/Y, despite the growing presence of multi-channel retailers.

1. Yahoo! remained the #1 site in April in terms of monthly visitors and recorded 128MM visitors, up 10% Y/Y. For context, Yahoo!’s Y/Y user growth was higher than the market’s at 4.1% and its fastest rate in over a year. Specific Yahoo! properties that appear to be contributing to the recent very strong user growth include Yahoo! Video Search, Yahoo! Local, and Yahoo! Education. A positive Dpoint.

Initiating coverage of RATE with a 2H (Hold, High Risk) rating & a $50 PT. With the stock up 60% YTD & trading at over 50X '06 non-GAAP EPS, we view valuation as relatively full and see investment pos's balanced against risks.

Key positives include: 1) Exposure to 'Net advertising secular growth; 2) Leading position among consumer finance Websites; and 3) Significant new growth opportunities ahead -- new verticals, tiered-pricing, traffic growth optimization, lead generation. Key risks include: 1) Significant competition from broad online consumer platforms & vertical offerings; 2) Revenue exposure to the challenging mortgage sector; & 3) M&A integration risks.

Our estimates -- $81MM in revenue and $28MM in EBITDA in '06 -- which we view as appropriately conservative, are in-line with company guidance.

What would make us Bullish? Material traction against the new growth opportunities. Bearish? Loss of consumers or advertisers to competitors.

Background:
Bankrate is a leading provider of consumer finance information via its core Website Bankrate.com, as well as via the co-brandedWebsites of its partners. It also provides rate tables (mortgage, home equity, auto, CDs, credit cards, etc...) and other consumer finance content to print publishers and newspapers. Bankrate has relationships with over 5,000 financial institutions and banks covering 300 different financial products. Broadly, Bankrate has two business segments – 1) online publishing (88% of 2005 revenue) and 2) print publishing (12%). Bankrate’s online publishing revenue consists of two formats -- display advertising (e.g. banner ads) and hyperlink advertising (e.g. pay-per-click links in its rate tables). Bankrate generates revenue in its print publishing segment by selling mortgage rate and product listings in hundreds of newspapers and magazines. Bankrate enters into agreements with print publications for blocks of print space that are sold to local mortgage lenders. Bankrate shares the revenue with the newspapers on a percentage basis.

Yahoo! will host an Analyst Day on 5/17. With the stock off 20% YTD and closing in on its 52-week low, there is clearly a lot of concern/skepticism about long-term growth drivers and increasing competition from Google (GOOG) and Microsoft (MSFT).

Expedia reported March quarter revenue of $494MM, OIBA of $88.5MM, and Adjusted EPS of $0.15 vs. our estimates of $534MM, $127MM, and $0.22, respectively. That’s a BIG MISS.

* Fundamentals were mixed. Revenue growth decelerated to 53% Y/Y from 77% Y/Y in the December quarter. However, the EBITDA loss improved sequentially from $3.2MM in December to $1.5MM in March.

Our proprietary unadjusted listings count totaled 35MM (excluding eBay Stores and selected international locations) for the week ended May 9th, up 4%W/W. Through six weeks of the June quarter, our unadjusted listings count is tracking listings growth of 19%Y/Y. That’s down from the unadjusted QTD growth rate of 20% last week and 27% for the March quarter. It’s still relatively early in the quarter but the tougher weekly comps in May likely means that our quarter-to-date (QTD) Y/Y growth rate will continue to trend down. Our extrapolated count (which includes adjustments) still is tracking to 27%Y/Y growth, modestly below our published estimate. And although the comp pattern will make for a challenging May, we believe that June’s easier comps will likely make up for it.

ValueClick reported March quarter revenue of $117.3MM vs. our estimate of $112MM, EBITDA of $30MM (adjusting for 1x item) vs. our estimate of $28MM, and GAAP EPS of $0.11 (adjusting for 1x item) vs. our estimate of $0.11.