My 2 cents: there are some serious valuation questions going on right now that I think people are completely missing. Typical during a maniacal period. Here are some predictions. I'll look back in a couple of weeks to see how I do. I would love to hear any other's responses to some of the recent high flyers that I happen to have strong opinions on.
(1) INAP: This is now a $5 billion company (and has been higher). Revenues for the first 6 months were $3.4 million. Now I love this company and based on last years revenues of $2 million, it seems like we have a 200% growth rate, but even if the company doubles its revenue in the 2nd half of the year and makes $10MM this year, we're talking 500X revenues. Seems a bit pricey to me.
(2) VIXL & CLIC: Originally liked both as most of you know and was very disappointed. Very simple problem with both: poor revenue growth. Don't see either taking off in the near-term.
(3) RDWR: Seems about right now relatively speaking(FFIV about 3X revenue and 3X price). But the whole sector is strong and may continue to rise together.
(4) IWOV: This is one that blows my mind. I like the company and should have bought it when Kimberly recommended it at 40, but now? It ran huge as a sympathy play to VIGN, but do people realize that VIGN is still the leader here by alot. And leaders usually demand larger multiples. Yet it is the exact opposite here. VIGN quarterly revenues were $25MM. Unbelievable. It has grown at approximately a 50% rate from quarter to quarter this year. And if it continues to do so, its annual revs will be $85MM. Its market cap? A mere $4.5 billion or 50X. Very cheap by internet standards. IWOV on the other hand had first half revenues of $5MM. Assuming the same growth rate as VIGN, you're talking about $16MM in revenue for the year. But its valuation is $2B or 125X revs. And IWOV has not proven it can provide VIGN's revenue growth and is not the leader in its field. So I have a feeling IWOV is going to fall while VIGN continues to impress when the mania dies down.
(5)BWAY: As Kimberly said today, will be the next INAP. But has even more reason to be so. Another company demstrating 50% growth quarter to quarter which should result in year end revs of around $25MM. Assuming the common 100X revs which all of these 50% growth companies tend to end up around, you get a $2.5B market cap. Assuming only 50X revs, you get $1.25B. But BWAY is at $830MM. Add on the fact that it has not really run yet from its IPO opening, Morgan Stanley was the underwriter, and it will be coming out of QP next week, I think this is likely to be the next big winner. Took large position in it today at 50.
(6) CYSV: Another I really like today and took about equal position to BWAY. Really wish I saw the alert sooner. Cost myself about 5 pts, but shouldn't matter. In at 50. VIAN's earnings today were unreal. 100% revenue growth from 2nd to 3rd quarter. Already has about $40MM in revenue for 1st 3 quarters and should end with about $70MM for the year (conservatively assuming 50% growth from 3rd to 4th quarter). There is no reason to believe CYSV won't do the same. Revenues for the first half of the year were equal to all of 1998. So let's assume that CYSV grows at 50% from 3rd to 4th quarter just like I did with VIAN from 3rd to 4th quarter (which I have a feeling will shortchange CYSV in the 3rd quarter after viewing VIAN's earnings). That would leave CYSV with around $30-35MM for the year, about half of VIANs. Market cap comparison: VIAN $2 billion, CYSV $500MM. This one has room to run.
(7) PLRX: Have to admit I have stayed away from non-tech internets lately. Infrastructure is where the money is. And PLRX doesn't really have much revenue to show for itself. But the market here is still enormous and there aren't that many players. DSCM revenue growth has been out of this world, up 400% from Q1 to Q2 and 300% from Q2 to Q3. If it merely doubles revenue for the 4th quarter, your talking $40MM annual revenue. And yet the company is only $1.5 billion, about 40X. Cheap. Now PLRX only had revenues of $800,000 for the first 6 months of the year so the fact that it is trading at around $850MM seems real high. 500X annualized revenues if you assume flat growth. But we probably won't see anything near flat growth. The result could be shocking to the upside providing impetus for the stock. If all of a sudden you have revenue of $5MM, you're talking about half the valuation of DSCM, which is precisely where PLRX is. So, relatively speaking, PLRX is about right. But both of these stocks are probably too cheap. And PLRX has the technicals. Goldman is behind it and its QP ends in a little over a week. It has gotten hammered from its IPO opening. So it could run next week into its QP end. Took small position today, looking to add quickly if the run materializes.
(8) AETH: Went in and got out. Just don't know with this one. PHCM competitor but very little proof of its own pudding. Will watch it.
(9) MCKC&NAVI: Really just MCKC. Haven't looked at NAVI yet. And that's too bad because I went into the wrong IPO today. But time will fix that. MCKC was overlooked today with NAVI and especially SCMR in the market. While SCMR opened at a hilarious price, MCKC was a steal for those who picked it up today, me being one of them of course for an average price of 21. I admit I don't have much to go on and did not take a huge position, but with 80% revenue growth from 1998 to 1999 with $14MM in revs for 1999 and the company's market cap is a mere $350MM. Seems cheap and simply overlooked. Could be the next 2nd day runner.
(10) SCMR: Just can't play these ridiculous games. I go to Vegas for that.
Well, that's all for now. Girlfriend's out with friends and I was bored. Think I'll go play with Jack now. He's a frisky little thing. Gizmo, however, tends to hide himself from the world. Very much a loner. Replies are appreciated. Always interested to learn from others opinions. Have a good weekend everyone. G&J |
