Speaking of Global and Europe :
Subject: TERRA NETWORKS (TELEFONICA INTERACTIVA) TRRA
To: Alastair McIntosh
From: Warren Jervey
Dec 7 1999 8:07AM EST
Reply #49 of 50
Europeans Are Investing E-Gobs
By Stephanie Gruner
Staff Reporter
DOW JONES NEWSWIRE
LONDON -- Europe's Internet stocks continue to skyrocket as investors bet wild sums on the sector.
In the past month, the market value of European Internet stocks has doubled in size to $55 billion (54.95
billion euros), according to Merrill Lynch. Although this includes the addition of two significant initial public
offerings - Mobilcom AG subsidiary Freenet.de AG and Terra Networks - appetite for European Internet
stocks appears insatiable.
Shares in Internet-service providers have enjoyed the greatest demand. "The story is that European ISP values
have taken leave of reality," said Miles Saltiel, an analyst with WestLB Panmure in London. Demand is
outstripping supply, pushing up market capitalizations of hot Internet stocks like Freeserve PLC, whose
capitalization nearly tripled in the past few weeks to more than $8 billion.
"There is Net frenzy out there," said Peter Bradshaw, European Internet analyst in London for Merrill Lynch.
"What we're seeing is clearly too much money trying to fit into too small a pipe with these Internet stocks."
As the pre-Christmas stock buying spree continues, bold investors have pushed price-to-sales ratios of
Europe's Internet stocks through the roof. Increasingly, investors in Net companies apply price-to-sales ratios
rather than price-to-earnings ratios, because so few Internet stocks have earnings.
According to WestLB Panmure, Freeserve PLC is trading at about 320 times its projected annualized sales of
$21.8 million. Terra Networks has a market capitalization that is about 162 times its projected annualized
revenues of $62 million. The company is valued at more than $10 billion and its registered users at $11,647
each. Meanwhile, Yahoo! Inc. is trading at about 107 times its projected annualized sales of $620.4 million.
Its market value may dwarf European Net stocks at around $66 billion, but its customers are valued at just
$3,469 each. Freeserve's customers are valued at $4,637 each.
Investors are betting that sales for Europe's Net companies will explode as people clamor onto the Internet in
Europe. While Freeserve reported a loss of 1.6 pence (three European cents) a share the quarter ended Aug.
21, its sales increased 104% from the previous 12-week quarter to GBP 3.4 million. Commenting on its
price-to-sales ratio, the company said it expects to continue growing rapidly. "It's also the anticipation of
growth of e-commerce in the U.K. that is driving expectations," said spokeswoman Lesley Smith.
To be sure, a number of the high-profile Internet companies have recently had much good cheer to share. Last
week Freeserve hooked up with British Telecommunications' BT Cellnet to develop mobile Internet services,
and online British auctioneer QXL.com PLC announced it will link Excite@Home Corp.'s customers to its
auction sites in Europe.
But much of the investment activity, say analysts, is driven by the increasing demand by individual investors.
Merrill Lynch's Mr. Bradshaw estimated more than 75% of the trading volume in the past few weeks has
come from retail clients.
Meanwhile, investors from abroad continue to show enthusiasm for Net stocks in Europe, hoping to find
bargains outside the U.S. The limited supply of these stocks is driving up prices. |
