William Blair & Company Initiates Coverage of The Knot, Inc. With Outperform Rating

Associate Analyst Meggan Friedman and analyst Troy Mastin estimated that the company, whose brands include The Knot, WeddingChannel, The Nest, and The Nest Baby, would earn $0.22 per share in 2008 and $0.46 per share in 2009.

"In addition to a strong competitive position and a comparatively economically insensitive and expansive market opportunity, we believe The Knot has the potential to drive revenue and profitability in three ways: better monetization of the existing wedding vertical, expanding the company's footprint in other life stages and services, and generating increased spending from national advertisers trying to reach The Knot's attractive audience at critical life junctures," Friedman said. "We project revenue growth in 2008 of approximately 13% and operating margin of 7% as the company invests in upgrading its legacy technology platforms and marketing, with revenue growth and the operating margin improving to 15% and 16%, respectively, in 2009 as the company begins to realize the benefits of the technology upgrade."

"We believe shares are attractively valued at current levels, and we favor the discounted cash flow methodology given The Knot's strong free cash flow and lack of pure-play comparables with similar market-leading positions," she added. "Compared with other interactive media companies, The Knot trades at a 5% premium to the group on 2009 estimates. We view this premium as justified given the company's strong brand, market leadership position, and industry growth outlook. Our discounted cash flow analysis implies a fair value of about $15 today, which is a 48% premium to the recent close of $10.40 and provides further justification for our Outperform rating."

William Blair & Company, L.L.C. has received compensation for investment banking services from the company within the past 12 months, or expects to receive or intends to seek compensation for investment banking services in the next 3 months.

William Blair & Company, L.L.C. is a market maker in the security of this company and may have a long or short position.

William Blair & Company, L.L.C. is a Chicago-based investment firm offering investment banking, asset management, equity research, institutional and private brokerage, and private capital to individual, institutional, and issuing clients. Since 1935, we have been committed to helping clients achieve their financial objectives. As an independent, employee-owned firm, our philosophy is to serve our clients' interests first and foremost. We place a high value on the enduring nature of our client relationships, the quality of our products and services, and the continuity and integrity of our people. William Blair & Company's offices include Chicago, Boston, London, New York, San Francisco, Shanghai, Tokyo, and Zurich. For more information, please visit www.williamblair.com

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SOURCE: William Blair

William Blair & Company, L.L.C. Tony Zimmer 312-364-8611 tzimmer@williamblair.com