eToys Inc. (ETYS) Message Board

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Technology Stocks : eToys Inc. (ETYS)

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To: gtc123 who wrote (613)	8/10/1999 8:18:00 AM
From: Rajiv	Read Replies (1) of 1330

I apologize if my "tone" appeared to convey some meaning. Some of the points that you have raised. - I agree EGGS is a 3rd tier internet stock. However, if you remember the early days of internet stocks, ONSL was one of the favorites. I am predicting that some e-commerce business models will go out of favor next year (just like the e-auction models are currently out of favor). BTW, I do not consider ETYS a top-tier internet stock. - The inventory numbers are from June 30. Do you think an e-commerce player builds inventory for December 5 months in advance? I don't think so. The inventory numbers are sharply higher (compared to other e-commerce players). This is because you can have 3rd party companies fulfill orders for stuff like books, computers, etc. (but not for toys). This business model is very suspect (to me) - when you have high levels of inventory, you take the risk of inventory write downs (toys can quickly lose favor too). And they don't have the luxury of fat gross margins to start with. The sequential growth rate of ETYS (Q1 to Q2) was 32%. If we assume that this will be constant (from Q2 to Q3), the inventory levels will cover the entire quarter's sales. E-commerce models are being given high P/S multiples because of very fast inventory turn-around rates (and ETYS fails in this area) - I am very confident that ETYS will run out of cash (the current 176 million #) before the end of the next year. I am also predicting a secondary next year. As to why it will run out of cash, it is not hard - assuming that ETYS will do around 75-100 MM in business in Q4 of 2000 (This is my estimate on their revenues for that quarter), they will have to have inventory of 75 million at the end of the 3rd quarter. They will easily burn the 100 MM in cash between now and then (their cash burn rate is going to go up). BabyCenter brings very little cash with it and it is also burning cash (a lot less compared to ETYS). - I am talking 100 million shares. Have you added the BabyCenter shares in your outstanding # of shares ? The lock-up restrictions are mentioned in the SEC filings - I am predicting that ETYS will not generate revenue of 400+ million in 2000. It is more likely to be half that number. Regards, Rajiv

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