Barron's slams PASA
Link - interactive.wsj.com
Que Pasa? Quien Sabe? In Other Words, Who Can Understand the Valuation of This Thing?
By Mark Veverka
What's happening?
We all know that evaluating Internet stocks encompasses less science than does opting whether to hit or hold in Atlantic City. But when you take a look at the metrics for some of the virtual flotsam and jetsam that hit the public shores, such as Quepasa.com, a Spanish-language Website based in Phoenix, they look downright ridiculous.
After being taken public last June, Quepasa has 14.4 million shares outstanding, trading at about 11 5/8 , which is good for a market value of about $167.4 million. It's a small float, but nothing extraordinary as far as 'Net mania is concerned.
Of course, forget profits, but most 'Net stocks can at least give the appearance that they can generate revenues. But Quepasa's revenues border on a joke. The Website managed to rack up a whopping $17,000 in sales for the June quarter. That's not a misprint, sports fans. Seventeen-thousand smackers. Ay, caramba!
Flight of Flan-tasy
Because that was the only quarter in which Quepasa posted sales of any kind, the only 12-month number available is an annualized run-rate (most recent quarter's revenues multiplied by four) of about $66,000. By at least one measure then, Quepasa is looking richer than a vat full of flan. The stock's price-to-sales ratio as of August 20 is a stratospheric 11,393 times. eBay, by comparison, looks like a bargain at just about 149 times sales. And for its part, Amazon.com seems a downright steal at a mere 18 times.
To make matters even sillier, Quepasa's revenues per employee, another valued measurement in a world where earnings are scarcer than Cubs World Series rings, are about $384 per employee. Amazon, in comparison, boasts about $483,131 per employee.
What are we trying to say here? That it's fair to compare a neophyte Spanish-language Website to the likes of Amazon.com, a veritable dinosaur of the Internet Age? Not at all. We're just trying to point out that there are an astronomical number of Internet concerns that have little reason for being public companies at their current jejune stages of development, except for the fact that somebody was willing to buy their dubious shares. This glut of wobbly Websites is eventually going to morph into a sea of orphaned companies trading at rock-bottom prices -- especially when the momentum crowd starts bailing on second- and third-tier 'Netcos.
More importantly, when you start looking closely at the fundamentals (somebody has to be first), you have to wonder what any investor would see in some of these profitless Web wonders. Other than to sell them to the greater fool.
Of course, some may boast terrific technology or may one day evolve into powerhouse portals, but that doesn't make them sound investments at their current levels of froth.
So, what do you do, throw up your hands and say no mas and miss out on the gold rush?
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