NetStock! by Steve Harmon 1999.08.10 Rebound Ahead?
Date:
Tue, 10 Aug 1999 02:07:20 -0700
From:
Steve Harmon <steve@e-harmon.com>
To:
netstock-list@listserve.com
___________________________
e-harmon.com's
NetStock! by Steve Harmon
ceo of e-harmon.com
"for the internet investor"
e-harmon.com
___________________________
1999.08.10-
Chernobyl. Any historians in the crowd can apply this one word to the
Internet stock sector and it suddenly makes sense. The meltdown. The glowing
aftermath.
Translation for those of you who tossed out your Russian dictionary: what
now for Internet stocks now that the correction has hammered them hard? Is
this the bottom or a bottom?
Having seen at least a dozen of these rollercoaster moments over the past 5
years with Internet stocks one method of evaluating the outlook centers on
overall Internet industry growth.
For example, if we look past the upswings and downswings in Internet stocks
the one key driver has been consistent: Internet growth. That's usage both
in the U.S. and increasingly more globally.
Growth can be gauged by several things: 1) new users 2) venture investments
3) innovation 4) corporate adoption 5) IPO capital
My estimates show there are at least another 25 million global Internet
users than there were at the start of 1999. That new demand fuels new
hardware,
1) New users-
My estimates put another 30 million global Internet users on the map since
the start of the year. That translates into access fees, hardware,
bandwidth, eccommerce, software and solutions to keep up with the data flow
demands.
2) Venture investments-
The continued capital inflow into the Internet from venture capital is at
record levels. 1998 was a record year for venture capital with about $11
billion pouring into technology ventures--and probably over half involved in
an Internet or Internet-related investment. That seeds the future Internet
industry as new firms tackle opportunity and add further layers of value to
the entire Internet experience from consumer to corporation
3) Innovation-
The part that most casual observers forget is that if it wasn't for the
ability of the Internet to be dynamic, flexible, absorb new ways of doing
communications and commerce then items 1 & 2 above wouldn't happen.
Innovation drives capital and connectivity ahead.
4) IPO capital-
More than 100 Internet companies have gone public in 1999, a record. The
size and amount they've raised at IPO has gone from an average of $25
million to $30 million last year to $40 million to $50 million this year. If
we do the math there that implies $4 billion to $5 billion in capital raised
by Internet firms going public. Take that a step further and that means $4
billion to $5 billion of newly-raised capital that these firms have slated
to be spent to grow their companies, push the industry ahead. I believe that
could spell positive news for those market-leading new IPOs who now can buy,
build and grow
What it all means: while the stock market cools off from a sheer onslaught
of Internet IPOs those firms already cashed up and pacing usage growth,
market leaders in their segments, and those that are building out faster and
faster services could be oversold at this point
A few of the stocks I like in this vein:
BackWeb, High Speed Access, Copper Mountain Networks, Xoom/Snap, Go2Net,
MP3.com, F5,
There's more. We'll cover them in a future report on broadband
infrastructure and what it could mean.
So while Wall Street simmers like the aftermath of a radioactive meltdown,
the summer slowdown may continue, I expect we could see a pickup in early
Fall into next year after a Y2K hiccup.
In my view the most important thing to look at in a market meltdown is
overall Internet industry growth - that's what I think drives value more
than the Fed or mood swings. Maybe it's not Chernobyl after all but a
release of some radioactive steam.
(c) 1999 e-harmon.com, inc.
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