The Future Looks Bright For These 3 Stocks

Now that the quarterly earnings season is winding down, it’s a good time to take a look at who the top performers were. The markets performance so far this month would indicate some pleasant surprises were delivered. However, the truth is that most companies saw analysts reduce their consensus estimates for the remainder of 2008 and 2009 after their earnings reports.

The markets positive reaction was due more to the fact that these downward revisions were already priced into the stock prices and in many cases turned out to be less severe than originally expected. However, there were a few stocks that not only turned in impressive quarterly performances, but saw analysts raise their consensus estimates following their earnings reports.

Internet Brands

INET’s (INET: 9.31 +4.61%) online advertising business turned in a very strong performance this past quarter and the company raised the low end of its guidance for the full year. Organic traffic to the company’s network of sites was a phenomenal 97%.

The company has developed a remarkable business model which focuses on acquiring under-monetized websites with strong organic traffic. To date, the company has acquired 21 new sites this year and continues to look for attractive targets. Some of the recent acquisitions this past quarter will certainly enhance their growth prospects as it allows them to enter into two new large verticals: shopping and careers (lookout Amazon and Monster).

Recommendation: Strong buy with a $10 price target.

Netflix

Netflix (NFLX: 70.45 -0.13%) recent quarter showed accelerating growth in their subscriber base, while the cost for acquiring those subscribers declined. We view this as a double positive, as more consumers recognized the value of the Netflix service it allows the company to grow at a more profitable pace (although I’m sure the Marketing folks will probably claim the credit).

Netflix seems well positioned to take advantage of the shift to streaming video services. The ability to successfully transition from a mail-order business could take this business to the next level. In addition, with the exit of Blockbuster, Netflix has no real competitive threat to be concerned with. These factors which will allow for a more efficient marketing spend and lower postage costs should drive strong bottom line growth in coming quarters.

Recommendation: Buy with a $38 target price.

Bidz

Bidz (BIDZ: 2.12 +2.91%) turned in one of the more impressive performances this quarter and raised their full year guidance. The number of order jumped 13% with the average order value increased 7%. In addition, the company was able to introduce its service to 65,000 new customers which is important as the Bidz.com website is addictive and tends to lead to repeat purchases.

Going forward the company seems to have tapped a couple of new initiatives which could produce big results. The company recently launched a Spanish-version of their website and plan to roll out additional language-versions in the near future. Currently, international sales account for only 25% of total sales, but it’s possible to see this growing to 50% in the coming years. In addition, the company is beginning to exploit the B2B market, as the company generated over $8M this quarter from unexpected B2B sales. While these sales tend to be more opportunistic, they could provide some significant upside in future quarters.

Recommendation: Strong buy with a $18 price target.