The third thing would be the partnerships with other players of the space, such as OpenTV [OPTV]and Liberate [LBRT] and Wink [WINK]. If you see some of those, that would probably be the biggest driver of the stock because those other stocks are valued at a factor ten times higher than WorldGate is, per revenue at least.
SHfn Interview: Analyst Predicts Steady Momentum For WorldGate - December 9, 1999
By Benjamin Walters - Contributing Editor
Seth Spalding Of C. E. Unterberg, Towbin Says Stock Undervalued, Speculates A Possible Relationship With OpenTV
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Seth Spalding, an analyst with C. E. Unterberg, Towbin, initiated coverage of WorldGate on November 17th with a "strong buy" rating and a six-month price target of $45. Yesterday, WorldGate nearly hit that mark-five months ahead of schedule. After stampeding from $34-3/4 to more than $43, the stock settled back to close at $41-3/4, enjoying a one-day gain of 24%. Despite the pop in its share price, Spalding explains in a StockHouse interview why he finds WorldGate a bargain relative to other players in the interactive television market.
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StockHouse: What is your assessment at this point of WorldGate [WGAT]?
Seth Spalding: There are a couple of trends going on. One is that they are in an emerging market, which is the interactive television market. Two is that they are significantly undervalued relative to their peer group. With their increased exposure to the market through coverage, such as my own, it's going to be a big player. Valuation-wise, they have a long way to go.
StockHouse: What is your price target on the stock?
Seth Spalding: $45. That was a six-month price target about a month ago, so over the next five months.
"...they are significantly undervalued relative to their peer group. With their increased exposure to the market through coverage, such as my own, it's going to be a big player. Valuation-wise, they have a long way to go."
StockHouse: When do you think this thing is going to actually move? Do you think it is going to move during the fourth quarter or not?
Seth Spalding: I think going from $20 to $31 is actually moving. That was a significant move that it had. You should see some interesting announcements coming out either concurrent with the Western Cable show, in Los Angeles, or just afterwards.
StockHouse: What are you expecting after this show through the first quarter? Are you expecting movement on the stock at that time?
Seth Spalding: I think you are going to see some pretty steady momentum over the next six months. The key drivers for these guys are subscriber number growth, and I think the fourth quarter is going to have some good numbers for that. I also think that news flow in terms of partnerships with MSOs (cable operators) is a very important variable, and you might see some partnerships there as well over the next six months. The third thing would be the partnerships with other players of the space, such as OpenTV [OPTV]and Liberate [LBRT] and Wink [WINK]. If you see some of those, that would probably be the biggest driver of the stock because those other stocks are valued at a factor ten times higher than WorldGate is, per revenue at least. So, if you start to see some relationships between these companies, I think that the evaluation of WorldGate will catch up with their peer group.
StockHouse: Do you really think that there is a possibility that they are going to do some deal with OpenTV or Liberate?
Seth Spalding: Again, nothing has been publicly announced. But if you speculate, I think there would be a very good relationship to be born between OpenTV and WorldGate based on the following: WorldGate is the exclusive supplier of two-way interactive service via the cable architecture, where Open TV and Liberate rely on the telephone return path. As the cable providers become increasingly competitive with the telecom providers, you are going to see the providers of interactive television want to provide service over an exclusively cable-based platform. WorldGate provides that solution, so there would be a very strong synergy between the two. At this point, OpenTV really is not an Internet service, first of all, and not interactive via the cable plan.
StockHouse: When I interviewed WorldGate's CEO Hal Krisbergh about one or two weeks ago, he had intimated that there was some blockbuster deal coming down the road.
Seth Spalding: I really don't want to speculate as to that. I think that the key things that are missing, or that one would look for, would be MSO relationships.
StockHouse: There had been some negative chatter on Internet message boards about insiders selling, broken promises, and talk about expansion in the past that hadn't materialized. So, there were some shareholders that weren't very happy about some of the stuff that management had been doing. Is everything meeting your expectations? Are you happy with how the company is performing at this time?
Seth Spalding: Absolutely. It's in a nascent marketplace. I think the space is coming together quickly, but not perhaps as quickly as people would like. It is certainly coming together as fast, if not faster, than some of the Internet names that would be put in the company's peer group
StockHouse: Thank you.
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