3SOF

INSP - InfoSpace, Inc.

Sector:    Technology
Industry:    Internet Information Providers

Profile: InfoSpace, Inc. engages in the provision and publishing of mobile content, products, and services to assist consumers for finding information, personalization, and entertainment on the mobile phone. The company provides media products and content to mobile operators, and portal and infrastructure services that enable mobile operators to deliver content and programming across multiple devices to their subscribers. It also offers search and directory services that enable Internet users to locate information, merchants, individuals, and products online. These directory services include online yellow and white pages services. InfoSpace offers search and directory services through its Web sites, Dogpile.com, Switchboard.com, InfoSpace.com, Webcrawler.com, and MetaCrawler.com, as well as through the Web properties of distribution partners.

Why a good value play

With a current PE of 6.25 and an industry average @ 36.29! INSP seems very undervalued.  It is the forward PE which is creating pressure on the stock and that may be due to some conservative guidance...

Since announcing a great 4th quarter and full year results on Jan25th INSP has bottomed:
http://biz.yahoo.com/bw/060125/20060125005950.html?.v=1

This report showed heavy cash($11.16 worth)... [perhaps a takeover target].. also heavy stock buy back by the company.

This news came out recently and may help boost INSP:

QuoteSprint, InfoSpace offer location-based service
Monday March 27, 11:35 am ET[/i]
http://biz.yahoo.com/bizj/060327/1264649.html?.v=1

Another reason to look at INSP is that the internet sector seems very hot right now.  The following is the internet sector chart from G-FORCE - The Week Ahead Outlook.  (http://www.3stocksonfire.org/trading/index.php?topic=5030.new#new)




Technicals

INSP may be setting up for a gap fill.  It recently crossed its 200sma and is climbing on a steep trendline(magenta)  We may have strong support setup @ 27 and 26.. and our 1st target will be around 33..so we have a nice risk/reward ratio as well.

9 months:




4 months:



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INSP is a value play, in a potentially strong sector with a nice TA setup.  We'll take it.  

We will buy INSP @ market open.

I'm with you on the TA. A move above $28.42 and its a clear path to the gap fill at $33.

The PE of 6.25 is a mirage. In the last quarter (Q4), 2/3 of the net income ($25M of the $38M) was due to a one time tax benefit "from realizing a deferred tax asset related to a portion of the net operating loss carryforwards attributable to continuing operations." And in Q1 2005, $80M was a one-time gain from a legal settlement. In 2005 INSP had ~159M in net income, but $105M of it was due to these non-recurring items. Removing them gives INSP a PE of ~20. Still undervalued though compared to the industry. The forward PE is very high, not sure if it's due to conservative guidance or not. Bottom line, if INSP hits the breakout point I'll buy it based on the TA, but I'm not sold on it being a value play so I'll sell the gap fill and will use a tight stop. Good luck to us all!

Wow, I just pulled up an all time weekly history for this stock.  This was one of those internet high fliers with the delta function shaped price history!  Looks like it peaked out at over $1300 at one point...

Hi Lucas,

You are indeed right that the TTM PE is inflated.

In this case, due to the amount of cash on the balance sheet and the one-time gains, it is more prudent to look at the enterprise value and EBITDA. This is also the measures that most often are used for leverage buy-outs.

INSP's EV is $493 Million and the EV/EBITDA is hovering around 10 (net of litigation!). This is the receipt for attracting a take-over offer from an equity fund or some of the main players in the market, which are loaded with cash.

INSP would be immediately earnings accreditive to the Yahoo's and Google's of the world (obviously depending on the price they would have to pay ).

I agree with eliteG that INSP is attractive based on its valuation compared to its peers. But what really makes this a great pick for 3SOV is the speculations around a take-over bid and the TA set-up.

The risk/reward ratio at this level is simply strongly in favor of a buy.

additional inofs:
INSP: Short Interest UP 11.0% to 2.8M in Mar 2006
Friday , March 24, 2006 16:18 ET

According to new short interest data from NASDAQ, short interest for InfoSpace Incorporated (NasdaqNM: INSP) INCREASED 11.0% to 2,829,408 shares for the month ended mid-March, 2006.

SYMBOL     FEBRUARY           MARCH          CHANGE       %CHANGE     DAYS/COVER
--------   -------------   -------------   -------------  ------------  ----------
INSP           2,549,504       2,829,408        +279,904       +10.98%           5

Based on INSP's 20-day average daily share volume of 607,050, it would require approximately 5 day(s) of buying to cover this short interest.

update INSP:

A low volume down day for INSP.. we are still up high in the latest pattern.. lets see if that magenta line holds. 

We will hold INSP unless it closes below 26.

update INSP:

INSP is consolidating in a pennant formation.. this could be very powerful when broken to the upside.  Here is news of a deal with Cingular(they just had on with sprint too).. these are major companies to deal with.. just missing Verizon.

QuoteCingular, MySpace and InfoSpace to Give Unsigned Artists a Cool New Way to Connect With Fans
Thursday April 6, 3:00 pm ET
Cingular's Mobile Music Studio on MySpace is a free, truly original platform that lets emerging artists create and market their personalized wireless content
Australian Indie Garage Rock Darlings, Shifter, to be First Band to Benefit from Partnership
http://biz.yahoo.com/prnews/060406/clth064.html?.v=45

Plan remains the same.. maybe we enter the gap zone soon. 

Charts:

Internet search sector is quite cool these days. GOOG is the leading stock in this sector and and is in decline.

Hope this stock can recover from last August crash.

50 EMa has crossed 200EMA 

update INSP:

INSP has broken its pennant lower but found support around the 20ema.  Earnings come out April 26th after market close.. so hopefully we will see a push into that.  Plan remains the same. 

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Position: bought INSP @ 28.05 on 4/03/2006
Order: Hold
Exit: on close below 26
Target: n/a
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update INSP:

INSP continues to be supported by its 20ema.  Its surprising that Google earnings did not have more of a positive effect on INSP.  Earnings are out Wednesday after market close.. we will place a stop for now and update again before earnings.

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Position: bought INSP @ 28.05 on 4/03/2006
Order: Hold
Exit: stop @ 25.85
Target: n/a
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update INSP:

INSP has earnings tomorrow(Wednesday) after the bell... we haven't had a great track record with holding over earnings.. but since this is a value play and GOOG(same industry) reacted well to their earnings we will hold INSP in the 3SOV portfolio unless our stop is hit.  Make sure you are aware that holding over earnings is risky.

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Position: bought INSP @ 28.05 on 4/03/2006
Order: Hold
Exit: stop @ 25.85
Target: n/a
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INSP: Short Interest DN 4.1% to 2.7M in Apr 2006
Wednesday, April 26, 2006 06:00 ET

According to new short interest data from NASDAQ, short interest for InfoSpace Incorporated (NasdaqNM: INSP) DECREASED 4.1% to 2,713,870 shares for the month ended mid-April, 2006.

SYMBOL         MARCH           APRIL          CHANGE       %CHANGE     DAYS/COVER
--------   -------------   -------------   -------------  ------------  ----------
INSP           2,829,408       2,713,870        -115,538        -4.08%           6

Based on INSP's 20-day average daily share volume of 515,670, it would require approximately 6 day(s) of buying to cover this short interest.


Earnings out tday after market close 

update INSP:

INSP had a nice strong volume rebound day before earnings came out.  Earnings were after the bell and instead of analyzing that I was watching after-market action and saw buying as high up as 28.20s(maybe even higher) but INSP was up less than a percent by the end(after-market).  Lets see if the market pushes INSP into that gap fill tomorrow.  If we are headed down our stop remains in-play.

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Position: bought INSP @ 28.05 on 4/03/2006
Order: Hold
Exit: stop @ 25.85
Target: n/a
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InfoSpace Announces Strong First Quarter Results; Posts Record Revenues of $90.3 million
Wednesday, April 26, 2006 16:10 ET

BELLEVUE, Wash., Apr 26, 2006 (BUSINESS WIRE) -- InfoSpace, Inc. (NASDAQ: INSP) today announced financial results for the three months ended March 31, 2006.

Revenues for the first quarter of 2006 were a record $90.3 million, reflecting an increase of $3.3 million or four percent over the previous high of $87.0 million in the first quarter of 2005.

Net income for the first quarter of 2006 was $3.0 million, or $0.09 per diluted share, compared to net income of $93.9 million, or $2.52 per diluted share, in the first quarter of 2005. Net income in the first quarter of 2005 included a net gain of $77.3 million from the settlement of certain litigation matters and net income in the first quarter of 2006 includes a $4.1 million deduction for stock compensation expense.

Cash, cash equivalents, and marketable investments at March 31, 2006, totaled approximately $395.6 million, an increase of approximately $20.2 million from the end of 2005. At the end of the first quarter, the Company had no debt obligations.

"InfoSpace had an exciting quarter, delivering strong results and record revenues fueled by strength in media downloads and online search," said Jim Voelker, chairman and chief executive officer of InfoSpace, Inc. "Just as important, we are successfully executing on our strategic initiatives including the deployment of two new mobile search products. Our search applications are now available on three of the four major carriers in North America."

First Quarter Highlights and Recent Developments

-- InfoSpace launched InfoSpace Find It! on Sprint Nextel. InfoSpace Find It! is a comprehensive subscription-based location enabled search product that allows consumers to easily and quickly find everything from people to nearby restaurants and movie times or maps and driving directions, all in one integrated application.

-- InfoSpace partnered with Cingular Wireless and Fox to offer Cingular customers Live Idol Ringtones of many songs performed by "American Idol" finalists hours after they are performed on the show.

-- InfoSpace announced a partnership with Cingular Wireless and MySpace to provide an original platform that lets emerging artists create and market their personalized wireless content.

-- InfoSpace entered into multi-year online distribution agreements with Alltel and RCN.

-- InfoSpace launched a redesigned Switchboard.com site with improved refinement tools and simplified navigation that allow users to find information faster and easier.

-- InfoSpace signed a distribution agreement to feature Verizon SuperPages advertisers on its online directory site InfoSpace.com (www.infospace.com) and its online search sites, including Dogpile.com, and InfoSpace's network of affiliate sites.

First Quarter Segment Information and Adjusted EBITDA

During the first quarter of 2006, the Company changed its segment reporting to reflect changes in its organization. The Company continues to present revenue from its two segments, Mobile and Online, consistent with historical presentation. Additionally, the Company will present segment gross profit, which is segment revenues net of respective content and distribution costs.

-- Mobile revenues were $44.1 million in the first quarter of 2006, an increase of $5.1 million from the first quarter of 2005. Mobile segment gross profit totaled $18.8 million or 43% of mobile revenue for the first quarter of 2006.

-- Online revenues were $46.1 million in the first quarter of 2006, a decrease of $1.8 million from the first quarter of 2005. Online segment gross profit was $29.9 million or 65% of online revenue for the first quarter of 2006.

The historical segment results for the first quarter of 2005 through the first quarter of 2006 are presented in the accompanying table to the condensed consolidated financial statements.

Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization ("Adjusted EBITDA")

Adjusted EBITDA was $12.7 million in the first quarter of 2006, a decrease of $9.2 million from the first quarter of 2005 Adjusted EBITDA of $21.9 million. InfoSpace's Adjusted EBITDA is calculated by adjusting GAAP net income to exclude the effects of income taxes, depreciation, amortization of intangible assets, stock-based compensation expense and other income, net (including such items as interest income, litigation settlements, foreign currency gains or losses, and gains or losses from the disposal of assets), as detailed in the accompanying table to the condensed consolidated financial statements.

InfoSpace's management believes that this non-GAAP financial measure provides meaningful supplemental information regarding our performance by excluding certain expenses and gains that are not indicative of our core business operating results. InfoSpace believes that management and the investors benefit from referring to this non-GAAP financial measure in assessing InfoSpace's performance. Adjusted EBITDA should be evaluated in light of the Company's financial results prepared in accordance with GAAP. A table reconciling the Company's Adjusted EBITDA to net income in accordance with GAAP accompanies the condensed consolidated financial statements in this release.

Outlook

The Company's guidance excludes the potential impact of any future one-time gains or losses. The Adjusted EBITDA guidance below has been prepared in a manner consistent with the historical Adjusted EBITDA data provided above and in the accompanying table.

Second Quarter 2006 Outlook

For the second quarter of 2006, the Company expects revenue to be between $90.0 million and $92.0 million. The Company expects that Adjusted EBITDA will be between $5.0 million and $6.0 million, and a net loss between $2.0 million and $3.0 million or $0.06 and $0.10 per share. Included in the net loss outlook is the impact of approximately $6.5 million of stock compensation expense.

A conference call will be held today at 2 p.m. Pacific/ 5 p.m. Eastern. The live Webcast can be accessed in the Investor Relations section of the InfoSpace corporate Web site, at http://www.infospaceinc.com. A replay of the call will be available approximately one hour after the call through May 5, 2006, at 7:30 p.m. Pacific/ 10:30 p.m. Eastern.

All information in this release is as of April 26, 2006. InfoSpace undertakes no duty to update any forward-looking statements to actual results or changes in the Company's expectations.