W) Is GNET a Go?
Rated a WATCH
Wondering where to go for Web-based search services; small business, e-commerce, and personal finance content; and multiplayer games? Just Go2Net. The company's string of branded Web sites includes Dogpile (search services), HyperMart (Web hosting), MetaCrawler (search services), PlaySite (multiplayer games), and Silicon Investor (financial information), among others. In expanding its Web site collection, Go2Net has focused on those that are technology- or community-driven, and all of its Web sites can be accessed via the Go2Net portal. Microsoft co-founder Paul Allen's Vulcan Ventures owns about 30% of the company; Go2Net co-founder, chairman, and CEO Russell Horowitz owns about 9%.
Some analysis on the stock.
Briefing.com
18-Apr-00 10:05 ET
Go2Net (GNET) 56 3/8 +1 1/8: There is a stigma that has been attached to many of the Internet stocks these days as the market is placing a newfound emphasis on the need to be profitable. In certain cases, some exceptions have been made provided an Internet company has demonstrated it is well on its way to profitability, but for Go2Net, one of the Internet's leading networks, no exception is needed. For the sixth, consecutive quarter, Go2Net has turned a profit, excluding non-recurring items, surpassing estimates for its second fiscal quarter by 80% in reporting pro-forma net income of $8.31 million, or $0.18 per share. That compares to pro-forma net income of $1.14 million, or $0.03 per share in the year-ago period. Year-over-year revenue growth was nearly as impressive, up 333% to $18.74 million-- a 34% sequential improvement. In fact, Go2Net's revenue, profits, commerce transactions, and number of users served were all at record levels, underscoring the effectiveness of a business model that benefits from advertising, licensing, subscription, and transaction fees from its sites and focuses on the key categories of consumer services, business services, and enabling services. The average daily page view traffic on the Go2Net Network grew to an average of 34.9 million page views per day in March 2000 versus an average of 12.6 million page views per day in March 1999-- impressive growth that certainly hits home with advertisers. What is likely to hit home with investors is that Go2Net has been enhancing its sales and profitability, and in its most recent quarter, was able to do so without making any acquisitions. That said, the company has said that it will continue to be aggressive in its strategic activity. Unlike many of its Internet brethren, it can afford to do so, having ended the quarter with $244 million in cash and short-term investments. Moreover, its stock still has intrinsic value as a currency for acquisitions. GNET is expected to earn $0.51 per share in FY00, and $0.61 per share in FY01. Granted, the profits aren't all that big at this juncture, but GNET's potential is with a projected 5-yr growth rate of 65.7%. The fact that GNET has shown that it is living up to its potential should place it among the winning standouts in the Internet shake-out.-- PJO
17-Dec-99
Trader's Edge: Go2Net (GNET)
[BRIEFING.COM - Patrick J. O'Hare] There is almost a sense of nirvana in the tech sector right now-- at least with respect to a select group of stocks that includes the industry bellwethers, the B2B and Linux-related issues, the wireless companies, and many of the Internet shares. Fortunately for its shareholders, Go2Net has not been left out in the cold by the investment community. In fact, it finds itself in a very cozy position, having risen 974% YTD on a split-adjusted basis. Heck, at its intra-day peak yesterday, GNET was up 54% this month alone. The impressive move this month has been accompanied by strong volume and resulted in the stock breaking out to a new all-time high, eclipsing its April peak of 99 1/2. While it is obvious the stock has been in favor this year, the fourth quarter push has been helped by supportive comments from Wall Street firms, the announcement of new strategic alliances with the likes of Net2Phone, Hasbro, and Allegiance Telecom, and of course, some good old momentum. Given the scope of recent gains, one can't begrudge investors for wanting to take some money off the table; and they did just that yesterday in the final hour... Strikingly, volume was 2.165 mln shares-- more than 2x its 3-month daily average-- yet block trades accounted for only 108.5K shares of that total, suggesting that it was the retail investor stuffing his or her stocking. As for Wall Street, the backing of GNET has been pretty steady as the company has given analysts reason to be bullish (as far as the internet stocks go)... Currently, analyst recommendations include 3 Strong Buys and 3 Moderate Buys. In its latest earnings report (fiscal Q4), GNET, before charges, posted a profit of $0.12 per share, 6 cents ahead of estimates, and versus a yr-ago net of $0.00; revenues rose 293% to $9.784 mln and were up 71% on a sequential basis... Gross profit as a percentage of net sales increased to 81.9% from 72.0% in the yr-ago period... The company noted that it was experiencing record levels of usage across its network. The latter is particularly important as that appeals to advertisers from whom GNET generates the bulk of its revenues... In a recent industry report, GNET was listed as the #9 most visited media network site.. Aside from ad revenues, the company also benefits from subscription and transaction fees from its sites. By and large, GNET's efforts are focused on small business services, personal investing, web search, and online gaming... Its success in these areas, its business model, and its growth prospects were given added credibility in June by Paul Allen who took a 34% stake in GNET for $426 mln. GNET is projected to earn $0.34 per share in FY00, and that estimate has come up $0.07 in the past 60 days... Its 5-yr projected growth rate of 51.5% is roughly in line with its peer group and is more than 4x that of the overall market. Like any other Internet stock, sentiment is a big driver of GNET, but time and again in its brief public history, buying the dips has proven to be a rewarding strategy... Take note, though, those dips can be pretty severe as GNET fell 55% from its April peak before rebounding, and then fell 52% from a subsequent peak of 95 1/16 reached July 1 (it doesn't have a beta of 3.31 for nothing). In short, patience has proven to be a virtue with GNET... While the risk-reward ratio is more bearish than ever (short-term) for the tech sector in our estimation, GNET's solid growth prospects, influential backing, adept management, and its positive earnings and sales momentum should remain supportive factors.
My colleague, Robert Walberg, pointed out recently that if you can't wait for the upcoming 15% (or so) pullback in the Nasdaq before jumping in, at least stick with the companies posting strong/accelerating top-line growth (i.e. GNET)... These are the stocks that will continue to lead over the intermediate- to longer-term... So if you get caught in the sell-off at least you'll be holding stocks that should lead the ensuing recovery rally.
News
18-Apr-00 09:08 ET
Go2Net (GNET) 55 1/4: Issue trading up 3 pts in pre-market after company posted Q2 net of $0.18 a share, seven cents above the First Call mean
13-Apr-00 08:38 ET Go2Net (GNET) 60 1/8: SG Cowen initiates coverage of Internet content provider with a STRONG BUY rating and $115 target.
07-Feb-00 National Discount Brokers (NDB) 23 13/16: Announced 3-year agreement with Go2Net (GNET 82 15/16) wherein NDB will be the exclusive brokerage serivce for the GNET Network, including Silicon Investor, for which GNET will receive annual payment of $7.5 mln; as part of the agreement, Vulcan Ventures (Paul Allen's investment organization) and GNET agree to purchase up to up to 1 mln shares of NDB at $27.
13-Dec-99 11:44 ET Go2Net (GNET) 92 7/8 +8 1/4: GNET closing in on its all-time high of 99 1/2.
29-Oct-99 08:11 ET Go2Net (GNET) 59 1/8: Trading up 5 points after strong Q4 earnings of $0.12, six cents ahead of Street; Prudential upgrades from "accumulate" to "strong buy" with $90 price target; raises F2000 revenue est from $46 to $57 mln and earnings from $0.27 to 0.38.
In Aug 10, 1999 GNET was pricy
PE of 224
Price/sales of 112
EPS growth rate of 47% Y2Y
44% decline in price from high
Yesterday
52-Week Low on 10-May-2000 $35.75
Recent Price $36.00
52-Week High on 16-Dec-1999 $111.75
Market Capitalization $1.13B
Shares Outstanding 31.3M
Float 22.2M
Price/Book (mrq) 11.22
Price/Earnings N/A
Price/Sales (ttm) 21.67
Mar 00 10Q info
Cash and cash equivalent $66.2M
Short-term investments $177.3M
Gross profit $15.7M
Total operating expenses $30.8M
SALES AND MARKETING $5.5M
GENERAL AND ADMINISTRATIVE $2.9M
PRODUCT DEVELOPMENT $2.1M
AMORTIZATION OF INTANGIBLES $20.1M (1)
INTEREST INCOME $4.0M (2)
Income (loss) from operations (15.1M)
Interest income, net $4.0M
Advertising Revenue $10.7M Mar00 vs. $3.4M Mar99
Subscriptions, electronic commerce, licenses and other revenue 8.0M Mar00 vs. 0.881M Mar99
(1) Goodwill and other purchased intangibles represent the excess of the purchase price over the fair value of tangible
assets acquired. The Company is amortizing goodwill and identifiable intangibles relating to acquisitions over a life of three years.
(2)Interest income is as result of interest earned on cash received from the sale of Preferred Stock.
The increase in revenue is the result of the development and increase in usage of the Company's Web sites over the last year resulting in an increase in the number
of advertisers purchasing advertising banners on the Company's Web sites, an increase in sponsorship advertising revenue, and an increase in sales of targeted advertisements with higher rates. This increase is also the result of an increase in subscription revenues, partnership license fees and ecommerce transaction fees year-over-year.
The Company has entered into formal commitments for capital expenditures of approximately $7,300,000 relating to the purchase of computer hardware, software, furniture and the relocation of its main corporate offices.
EPS 0.04a to 0.07a to 0.07a to 0.12a to 0.14a to 0.18a Mar00 Briefing.com after excluding nonreoccuring charges
EPS (2.04) to (4.07) to (0.21) to (0.38) to (0.39)Mar00 per Hoovers
Revs 4.3M to 5.7M to 9.7M to 14.0M to 18.7M Mar00
Chart Analysis
Was $80 in April, declined to $36 yesterday and shot up to $45 today. 200/50/10 bearish stack. Red MACD since Apr 3.
24% institutional investors highest in last four quarters
Insiders sold at the $70-90 price range making themselves a tidy profit.
Summary
Briefing.com paints a very rosy picture. I see a nonprofitable acquisition machine in an intensely competitive marketplace. I don't use metacrawler the search engine so that is probably true for many. Silicon Investor numbers not reported, but probably in the 8M subscription figure. Slaes and G &A seem a little high. Very dependent on the flawed advertising revenue model. Revenues are increasing at a nice q2q sequential rate, but amorization of goodwill to acquistitions seems high also. We need a quarter with out these one time costs that briefing.com excluded. Rated a WATCH.
Jack |
