TheTruthSeeker.com recommends Preview Travel "Long"
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TheTruthSeeker.com recommends Preview Travel (Nasdaq:PTVL) as an undervalued Internet Investment.
eCommerce is a finicky thing, while the general premise is that anything sold on the WWW is good thing, in actuality this is not the case. Some goods and service lend themselves well to shopping and acquiring via an online environment while others clearly do not.
For example online groceries is a premise that seems to make sense on the surface, but a little more though shows the weakness of stocks such as Webvan (Nasdaq:WBVN) and Peapod (Nasdaq:PPOD). Packing selective groceries is labor intensive given any scenario. Groceries
stores are located very close to the vast majority of Americans, online browsing of JPG images of products is still time consuming the majority of users which browse as sub-56K download speed. Most importantly the food and groceries business is a commodity business in essence with many suppliers and very low margins. Given these factors at best in our opinion online groceries will be relegated to nothing more than a minority niche market at best.
TheTruthseeker has identified a stock that he believes is fits a proper Internet commerce model and is undervalued. Preview Travel (Nasdaq:PVTL is a provider of branded online travel services for leisure and small business travelers. biz.yahoo.com
The travel services industry is very well suited to the Internet because.
1. Travelers need information, the Internet is well suited to this.
2. The WWW allow for convenient comparisons
3. The shipment of the Merchandise is not substantial in terms of weight and can be automated
4. The travel industry is a growth industry.
TheTruthseeker recommends a “long” position, with a 6 month target of $60, and an upside of$100++.
Last trade on Tuesday November8th was 30 ½. TheTruthseeker investigated PTVL to see if the 4.11M share short number was justified. This is a very large short interest for PTVL comprising more than half the Float. After the below analysis we believe is a solid internet stock and the Merger and Expedia IPO should only help the price.
PTVL is particularly attractive because of its growing financial trends, its industry leading contend, and ultimately it locked up AOL exclusive for AOL users.
All of the above factors made PTVL a good investment but the recent news has placed Preview Travel into the next level. On October 4th Preview travel announced that it would go into a merger with it competitor Travelocity, the combined unit will be 40% larger than its nearest competitor. “Merger creates the leading online travel service in the largest retail e-commerce category, with a combined registered membership base of 17 million and more than $1 billion in projected 1999 travel sales. New enterprise to build upon strategic partnerships with major Internet portals including America Online/Netscape, Yahoo!, Lycos, Go Network, Excite, @Home and CompuServe.
biz.yahoo.com
cbs.marketwatch.com
Next the Merger was blessed with upgrades and strong performance and hitting an all time high.
Then on October 13ths Fidelity Management & Research took a 12% stake in the Preview.
biz.yahoo.com
On October 21 Preview Travel Announces Record Third Quarter Results
biz.yahoo.com
An most recently Preview Travel announced it would “Offer Consumers Seamless Access to Wholesale Hotel Rates Through Hotel Reservation Network” HRN is associated with Barry Diller's (Nasdaq:USAI)
biz.yahoo.com
Everyone agrees that this merger is a great deal for all involved especially PTVL holders, but the question is how good. The Truthseeker found the following analysis on the Message Boards, while the scenario may be optimistic, there is clearly logic in the analysis
“To recap the story, Sabre's Travelocity division is merging with Preview Travel (PTVL) to form a new company travelocity.com (TVLY). Sabre is also throwing in $50 million cash, and will own 70% of TVLY, while PTVL owns the other 30%. Also PTVL shares will be converted 1:1 to TVLY.
Currently PTVL has 13.8 million outstanding shares. So TVLY will have 46 million (13.8 / 0.3) outstanding shares, out of which 32.2 million will be held by Sabre (on paper anyway).
Now look at market capitalization. TVLY will be the No.3 largest e-commerce site, behind AMZN (26 billion market cap) and EBAY (18B). A simple extrapolation will get you 10B for TVLY.
Looking it from another angle. Priceline.com (PCLN) is the No.3 online travel site behind the current Travelocity (the merged TVLY will be even bigger) and Microsoft's Expedia, yet the market values it at 9.3B. So 10B is really a pretty conservative market cap for TVLY.
Now divide the market cap by outstanding shares, you get the share price: $10000 million / 46 million = $217
Of course, you'll have to wait till first quarter 2000 when the deal is complete to expect that price. Now PTVL is traded at 28-31 range. A 3-4 month wait for an 8 fold increase is well worth it,wouldn't you say?”
Again this is an optimistic estimate by the author, however it has logic and rational. The proper valuation is always strange with Internets but the combined Travelocity/Preview Travel will be one of the largest web sites in terms of revenue.
The merger is schedule to be completed mid first quarter 2000, but one dramatic event isscheduled for TODAY, which makes PTVL compelling now. Microsoft will be spinning off its Expedia (similar service as PTVL) on November 11. Since the combined Preview Travel/Travelocity combination is larger that Expedia. The Merger entity should have nearly a 1.5 multiplier to the Expedia offering. Redherring.com is calling the Expedia offering the Red Hot IPO of the week.
What other factors favor a long position in Preview Travel.
1. Preview Travel located in San Francisco near Silicon Valley excellent mind shares and partnering options
2. About 3 million of the outstanding shares are held by institutions
3. Shorting has been aggressive in this stock Shares Short as of Oct 8, 1999 4,110,000 Shares
4. Full merger bonus has not taken place and will occur in Q1
5. This is a growing industry in general and online
Summary, PTVL is a good stock in the right place at the right time, for the right industry. Travel is a good fit for the Internet. This merger has taken PTVL from a number 2 or 3 player into the clear
market leader. When compared to other Internet companies in the same marketplace with similar numbers of users, PTVL is clearly undervalued. The first test of Market Valuation will be with the
Expedia offering this week, however the stock certainly woke up on Monday gaining 6 points.
The HUGE short interest and larger institutional holding give greater chance of near term spikes due to likely short squeeze covering.
PTVL is a solid stock purchase that should be considered part of a core Internet holding rather than an Internet quick play. Seldom doe theTruthSeeker see a realistically valued Internet company, lets not hope that Preview Travel is the first and last. I would say more but I am now planning a nice trip to send my mother-in-law on. I just hope I can convince my wife that the savings of the one way ticket option really do make sense. ;-)
The Truthseeker
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