Well I hyper-jumped over to RB to check out the thread there and got this nice post from bluephoenix. Hopefully it will spark some interest around here.
I guess the only thing I can say about today's activity is that it reflected the same problem we've seen for weeks now: The market absolutely loves web hosting stocks, and is perfectly willing to bid them to the stratosphere. No price seems to be too high for the analysts, who think that web hosting is "the" business to be in. EXDS, ISLD, and AKAM -- pure web hosting plays -- are going like gangbusters, and we're not. I hate it, and I understand why everybody on this board hates it, but it is not -- I repeat NOT -- a reason to sell.
It's time to put some things in perspective here. MFNX has about 190 million shares outstanding, and a market cap of about $7.5 billion at today's price. Its business includes not just Abovenet, the second-biggest web hosting company in the business, but also the most well-established network of dark fiber cable in North America, presently being leased to the highest bidders.
Following its upcoming split, EXDS will have about the same number of shares outstanding -- some 180 million. Its present market cap, however, is just under $16 billion, more than twice as much as MFNX's. EXDS has some assets in its portfolio other than web hosting, but it's basically a pure hosting company.
Digital Island, Sandpiper acquisition notwithstanding, is not even close to Abovenet or EXDS in terms of its hosting business. Yet, after this week's run-up, it has a $5 billion market cap on 34 million outstanding shares.
What this means, quite simply, is that MFNX consisted only of Abovenet, it would be trading at a 50% discount to its peer EXDS. At its current $40 price, you're not only picking up a blue-chip hosting company at half-price, but you're basically getting MFNX's fiber network business for free. Fiber, moreover, is itself becoming one of the hottest sectors in the market right now, so MFNX would likely be poised for a pop even without Abovenet.
The lackadaisical movement in the stock is, in my opinion, due almost entirely to a lack of information. Imagine the impact on this stock price if, during its coverage of EXDS or ISLD, CNBC were to mention that MFNX (through Abovenet) is in the same business. Imagine what would happen if Goldman Sachs were to reiterate its buy recommendation on the stock, reminding the market of the competitive edge MFNX gained by combining a fiber network with a web hoster. Just one little bit of news -- one little push -- is all we need to start evening out the disparity between our stock price and EXDS's. We know that push will eventually come, because we know that there's nothing fundamentally wrong with the company. We just have to be patient, knowing the pop will come sooner or later. The "later," of course, is the next earnings release.
You should remember, by the way, that you could have bought ISLD in early September for about $25, and be sitting on a 500% gain right now. There's no reason why MFNX won't be next.
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