There is a lot of skepticism about the sustainability of their business model. The core of its model (and Conduit) is that they get less savvy computer users to download "stuff" that automatically loads a search toolbar on to their web browser. When users use the search feature of the toolbar and click on websites, the company gets paid for that referral.
The toolbar can often be difficult to remove, prompting many online complaints.
Google, Yahoo and other search providers have been taking steps toward stopping the practice but Perion, Conduit and others have been changing to adapt. Are they totally clean and honest about the toolbar loading? And shouldn't toolbar search revenues eventually drop off as people realize they don't have to get it installed?
Of note, AVG decided to move completely away from this toolbar based model and go to subscription payers for its decent anti-virus software. At least they have a good product! You can see the impact on AVG's growth as it transitions to this new model over the next year with analysts revising estimates downward.
In sum, PERI is cheap but I can understand why. Oh, and the company doesn't believe in buying back its own shares (stated on one of the last CCs). With a reverse merger approaching and millions of Conduit shares to be unlocked in the next year or so, there may some tough times still ahead for the stock. Of course, this could still move up 20-30% off these levels, but I think this stock is best for swing trading and not as a long term investment.
