Jefferies said its recent meeting with the management of ValueClick Inc. (NASDAQ: VCLK) gave more confidence that the company is moving up the value chain.

Our recent meetings with ValueClick management give us more confidence in the company's progress on recent acquisitions and its evolution into a higher quality provider of digital marketing services. We remain positive on the stock with a $20 price target, said Youssef Squali, an analyst at Jefferies.

Following years of being primarily a direct marketing company making financial acquisitions, ValueClick is slowly evolving into a provider of a broader set of digital services including brand and mobile marketing.

Squali said this is done in part through the acquisition of higher quality assets with faster growth profile including Greystripe and Dotomi. As a result, ValueClick is dialing down some of its lower margin Owned & Operating business, which relies heavily on paid search (i.e. Google) for traffic generation.

While all transitions are risky, he views this strategy as sound and one that should position the company for long-term organic growth/margin expansion, and remove some of the pushback that has dogged the stock for several years.

Squali estimates that the hit to the fourth quarter and fiscal 2012 O&O revenue from such a move will be $6 million to $8 million, and $30 million, respectively. Excluding acquisitions and O&O, ValueClick's implied organic revenue growth (based on the $700 million-plus revenue base) is in the high-teens/low twenties, which is faster than the industry's average.

He said media business would benefit from acquisitions/salesforce expansion. Excluding acquisitions, media revenue should grow in the high-teens/low twenties organically, driven by the doubling of the sales team, geographic expansion and new products, particularly video.

With the acquisition of Greystripe (display mobile ad network) and Dotomi, media's 2012 reported growth should be 70 percent-plus year-over-year, implying about 50 percent year-over-year growth for the acquired assets (versus 100 percent in 2011).

He finds that the ValueClick story is improving both in terms of growth/margin, and in terms of clarity of mission/quality of assets.

As such, we remain positive on the stock and find the current valuation compelling, at 5.2 times EBITDA and 10.5 times price-to-earnings on our fiscal 2012 estimates. We are tweaking our SBC and amortization estimates slightly to better reflect the recent GreyStripe and Dotomi acquisitions, said Squali.

The brokerage lowered its 2011 EPS estimate for ValueClick to $1.49 from $1.50, while maintaining its 2012 estimate of $1.52. The brokerage also maintained its 2011 revenue estimate of $552.2 million and its 2012 estimate of $704 million.

ValueClick stock closed Friday's regular trading down 3.33 percent at $15.97 on the NASDAQ Stock Market.