ReachLocal Inc.'s shares jumped Thursday after a Janney Capital Markets analyst initiated coverage of the online marketing company with a "Buy" rating on its stock.
THE SPARK: Analyst Yum Kim said in a research note that an investment in ReachLocal is one of the best ways to take advantage of current positive trends in online local advertising and local e-commerce. He put a $15 price target on the stock.
THE BIG PICTURE: ReachLocal, based in Woodland Hills, Calif., provides online marketing and reporting services for small and medium-sized businesses. This includes search engine marketing products, tools for improving web presence and social media marketing.
THE ANALYSIS: In Kim's opinion, online local advertising has expanded during the past few years from simple search-driven advertising to daily deal formats and now to social media, with the mobile channel becoming an increasingly becoming a more relevant marketing tool. He believes many businesses are simply overwhelmed by the complexity of marketing through all these formats and face many challenges in successfully launching and managing such campaigns.
The analyst said that ReachLocal's unique, full-service approach to online marketing caters to such companies' needs. The company has a large market opportunity in the U.S. but he also sees a large market opportunity abroad.
SHARE ACTION: Shares jumped more than 12 percent to $12.59 by early afternoon. Its shares are nearing the high end of its 52-week trading range of $6.05 to $13.98.