CIRC ALERT:
Price coming off morning highs. Buying opportunity. Volume already above yesterday 1,500,000 shares traded.
Briefing.com report follows.
RADAR
RADAR
Trader's Edge: Circle.com (CIRC)
03-Nov-99 00:03 ET
Profits do matter after all... Over the past six months, investors have proven that they
have not completely lost their way, swapping out capital-burning e-commerce stocks for
names that have reached, or are on the track to, profitability. So, while bleeders such as
Amazon.com (AMZN) have been in the doghouse with investors for the better part of
the year, Internet infrastructure companies have captured the market's imagination.
Many of these companies have reported profitability within months of coming public.
But with valuations becoming stretched beyond belief, investors have begun to search
for the next potential earnings geyser. One of the groups they've uncovered is Internet
Professional Services.
Trading Points
Bolstered by attractive valuations, small floats and earnings momentum, Internet
Professional Services stocks have been on a rampage. Leading the advance have been
Scient (SCNT), Viant (VIAN) and Razorfish Inc. (RAZF), all of which posted sizeable
upside earnings surprises for the recently reported third quarter. For example, VIAN
came in at $0.06 a share, when a loss of $0.06 a share had been expected. These three
stocks have advanced 105%, 140% and 90% over the past month.
Outsourced marketing solutions company Snyder Communications Inc. (SNC) couldn't
have picked a better time to issue a separate stock to track the performance of its
Circle.com unit. Enthusiasm for all-things-Internet-consulting have carried the stock as
much as 58% higher since it began trading late last month.
Under terms of the recapitalization plan, Snyder Communications shareholders received
0.25 Circle.com shares for each SNC share owned. Except for cash received in lieu of
fractional shares, the deal was a tax-free transaction.
Had Circle.com come to market through an initial public offering, the company's
October 26 earnings report would have attracted a great deal more attention. But
company's lack of visibility this quarter may prove to be a godsend for investors who
prefer to enter a stock before the momentum crowd has run it to the heavens.
For the quarter, Circle.com logged revenues of $10.2 mln, up 146% from the prior year
period. On a bottom-line basis, the company reported a loss of $0.11 a share, reversing
a year-ago profit of $0.01. Circle.com attributed the red ink to investments in
infrastructure.
During the qtr, the company added United Healthcare, Teligent and PNC Bank to a
customer list that already includes E*TRADE, IBM, Bell Atlantic, Wall Street
Journal.com and UPS.
CIRC has traded between $9 and $15 3/4 since hitting the market. Average daily
volume has been just under 300,000 shares. As price action today illustrates, stock has
experienced the volatility usually expected of a new issue. After opening at $12 9/16,
the stock rallied almost 20% to $14 15/16 by mid-day. CIRC finished the session with
a gain of less than 1%, on volume of 496,000 shares.
Would expect next major spike in the stock to come on initiation of coverage by Wall
Street analysts. Given towering gains experienced by other stocks in this group over the
past several months, would expect analysts to be rather aggressive with their price
targets. |
