A timely article? From Yahoo:
fnews.yahoo.com
Nov 30, 1998
Onsale: Internet Mania Strikes Again
Well, it's about time. After watching eBay shares go from $18 to $218, in the span of about
two months, Onsale (Nasdaq:ONSL - news) is finally participating in the Internet frenzy that
has given eBay (Nasdaq:EBAY - news) -- Onsale's chief competitor in the online auction biz
-- a monster-size market capitalization. After treading water for months, Onsale last week
saw its shares rocket to new highs, as its stock doubled twice.
Welcome to Internet Frenzy 1998, where dot.com companies get bid up to valuations that could take some of them a
half-dozen years to grow in to. And for Onsale, the fun could just be starting. After all, with a market cap of "just" $1.85 billion,
Onsale's valuation looks cheap when compared to eBay's Godzilla-like market cap of $5.88 billion. Indeed, since we wrote
about eBay four weeks ago, the market has added another $135 to eBay's share price. It looks like Onsale has some
catching-up to do.
Fueling the rise in Onsale's stock is the fact that on-line shoppers are expected to shop the 'Net with a vengeance. "Over 30
percent of online users are expected to shop over the net this year,'' said Rakesh Sood, an analyst who covers eBay for
Goldman Sachs & Co, speaking with Bloomberg News. "That's two-times larger than the number of on-line shoppers from last
Christmas season.''
According to research firm Jupiter Communications, as reported by Reuters news service, some $2.3 billion is expected to be
spent online during the holiday season, up from $1.1 billion in 1997. Some experts expect the number to reach well over $5
billion.
Investors, in fact, seem to be banking on the $5 billion "whisper" number. With each new recommendation or forecast showing
what Internet retailers and auctioneers are expected to reap this Christmas season, share prices vault ever-higher.
"Although only about 4 percent of Internet users were shopping online earlier this year, we believe that proportion has more
than doubled in the last six months -- with further increases as the holidays approach,'' Robert Ference, managing partner of
Marketing Corp. of America's Marketing Research Group, said in a report.
Cha-ching! Add another $10 to everybody's share price.
"There's always going to be that contingent that wants to go and smell and feel the merchandise, but if there's a more efficient,
more accommodating (shopping) method, which I think the Internet provides for a lot of different retail categories, Internet
retailing is going to do nothing but proliferate," said Tony Cherbak, a partner at Deloitte & Touche, also in an interview with
Reuters.
And as Cherbak talked about the Internet retailers, share prices rose again.
In addition to the boost Onsale received from experts talking up the prospects of this holiday season, Onsale was busy touting
its own business and prospects. On Tuesday Onsale announced that it had opened up a new holiday shopping store, accessible
through its home page, and available until the end of the year. Shoppers can buy things from cameras to cruises, with prices
starting at $19.99.
"The Onsale Holiday Store is an excellent way for our customers to find and purchase holiday gifts online while avoiding the
traffic and shopping mall crowds," said Jerry Kaplan, Onsale's chief executive officer, through a Business Wire news release.
"Our customers will find a wide variety of merchandise, from laptops and vacation timeshares to treadmills and digital cameras,
all at great prices."
Not surprisingly, shares of Onsale went ballistic, adding several hundred million dollars to the company's valuation.
And when the company wasn't issuing releases touting the convenience and ease with which a consumer can shop on its site,
the company was issuing press releases outlining the amount of money that people are spending on its Web site. According to a
study conducted over the last twelve months, the average customer spent $800, the top 10 percent of customers spent $4,400,
and the top 1 percent spent $16,900.
Add the optimism that investors have this holiday season to the tangible dollars that Onsale says is being spent on its site, and
there's little surprise that Onsale's share price has screamed forward with the force of a locomotive train.
Revenues for Onsale last year were $89 million. Onsale is expecting more than $200 million this year. Meanwhile, earnings
aren't expected until 2000, if then. No problem there, since investors bidding up Internet stocks believe that earnings aren't
important -- at least not at this juncture. For now, top-line growth remains king. And since Onsale is on pace to grow its top
line by more than 100 percent this year, it looks as though investors are betting on a merry Christmas for the company (or for
continued momentum in its share price), as share prices get pushed ever higher.
Got my original cost almost all back. Keeping the rest of ONSL since I think e-commerce is here to stay. |
