UPDATE: Goldman Sachs Color on Demand Media Upgrade

Goldman Sachs, which upgraded shares of Demand Media (NYSE: DMD), is providing some color on the stock.

“We upgrade shares of DMD to Buy (from Neutral) as we believe the stock has negatively overreacted to the impact of Google's (NASDAQ: GOOG) ‘Panda 2' algorithm changes,” Goldman Sachs writes. “Panda's likely single-digit impact to earnings has sent shares down 40% since mid-April (and 20% below its IPO price), and we believe current valuation reflects future negative changes that are unlikely to materialize.

“Management has identified and is in the process of fixing Panda-related issues, and “Panda 3” does not appear to threaten the company. DMD is a unique business model and one of the fastest-growing Internet companies; we look for a 42% EPS CAGR from 2012-2015E.”

Demand Media closed Monday at $46.33.