Morningstar's Reassuring "take" on EXDS ...I found this just now and thought others may not have seen it.
One interesting comment is this: "All major Web
hosters are losing money in order to expand
their infrastructure." In other words, they could have profits if they wanted to but choose to expand instead.
HERE's THE FULL REPORT:
Stock price as of analysis date: $26.25
Exodus is the sole Web hoster that we would
consider scooping up now.
If anyone makes a killing in the Web-hosting
market, it will be Exodus. Despite being weighed
down by heavy capital expenditures inherent to the
industry, Exodus is the clear leader in a booming
market. Technology market research firm Gartner
Group IT forecasts Web hosting will grow from a
$4.2 billion business in 1999 to $20 billion in 2003.
We find Exodus' recent acquisition of Global
Crossing's GX GlobalCenter Web hosting unit to be
a shrewd move; with one fell swoop, the firm
cemented its leadership in the market. According
to a 1999 study by International Data Corporation,
Exodus has the greatest market share (9.3%) in this
fragmented industry, leading rivals Verio VRIO
(7.6%) and GlobalCenter (5.6%). Through organic
growth and the pending close of its latest
acquisition, Exodus' market share is poised to
exceed 20%. Among its 2,830 customers are 48 of
the top 100 Web sites, as measured by Jupiter
Media Metrix JMXI.
Exodus is pulling away from the competition
through its mastery of up-selling--winning
customers with basic packages, then adding
premium services. Once customers sign up for
basic Web hosting, they are offered a wide array of
services, including security software, network
traffic monitoring, consulting, data backup, and
caching. Successful up-selling boosted average
revenue per data center customer to $299,000 in
the September quarter, compared with $259,000 in
the June quarter.
The biggest risks to the company are
industry-specific: Like most other Web hosters,
debt is high and profits are slow in coming because
of the buildout of data center facilities and network
infrastructure. We think this group of stocks tends
to be quite risky. However, Exodus is the one gem
of the bunch by being closest to profits, claiming
dominant market share, and holding a strong cash
position.
A post-earnings sell-off at the end of October sent
Exodus stock tumbling into the $20s. We believe
that this price drop has been overdone, and that
patient Exodus investors will be rewarded. |
