Benchmark Comments on GSI Commerce after News of Nordstrom's Decision to Acquire HauteLook (GSIC)

Benchmark is out with its report today on GSI Commerce (NASDAQ: GSIC), after Nordstrom's announced Thursday that it is acquiring HauteLook, an online retailer, for $180M.

Jamie Nordstrom, the President of Nordstrom direct stated, "Customers are responding to this way of shopping, so we'd like to participate," in a Dealbook article.

In a note sent to clients, Benchmark writes, "GSI Commerce could receive some valuation support for its private sales website Rue La La due to Nordstrom's $180 million purchase of HauteLook. We guesstimate that the acquisition of HauteLook implies about 1.5x 2010 revenue of $110-120 million. Applying that multiple to GSIC's $217 million 2010 revenue from Rue La La gives you $326 million or $4.50 per GSIC share. HauteLook had losses of about $10-20 million last year, while Rue lost $9 million."

The Benchmark analysts go on to say, "Given that Rue missed expectations last year and lack of contribution to cash flow as well as GSIC's stock underperformance relative to the eCommerce group and its sudued 10x 2011E EBITDA trading multiple, we assume GSIC may be getting minimal if any value for Rue. Acquisitions of comparable private sale companies and the potential IPO of sector leader Gilt Groupe late this year could help highlight the hidden value of Rue. GSI trades at 10x our 2011E EBITDA estimate of $190 million, below ecommerce peers at 13x. We use 12x to arrive at a price target of $28 per share. Our rating on GSIC remains Buy."

At the time of posting, shares of GSIC were trading at $22.17, up 0.67% from Thursday's close.