note out of DLJ's Jamie Kiggen today:
RATING: Buy Change: None 12-Mo. Target: $550
SUMMARY
· Thirty-four clients used FreeMarkets' auction services in 4Q, greatly exceeding our 21 client estimate
and nearly doubling the third quarter level of 18 clients.
· Among these are some of the largest names in industrial purchasing, the majority of whom are likely
to remain FreeMarkets clients going forward.
· Potentially adds $2-$3 million of upside to our $7 million 4Q revenue estimate, as well as visibility into
FY00 (we estimate $42 million in revenue for the year).
· Reiterate Buy Rating. Announcement indicative of FreeMarkets' substantial momentum and should
be a catalyst for the stock. FreeMarkets should be a core Internet holding.
IMPORTANT POINTS
· This morning FreeMarkets announced that 34 clients used its auction services in the fourth quarter, nearly
doubling the third quarter client count of 18 with some of the most impressive names in industrial purchasing.
This exceeds our fourth quarter estimate of 21 clients by over 60%. While an exact correlation of revenue to
clients is difficult to pin down, we believe this could add potentially $2-$3 million of upside to our $7 million
fourth quarter revenue estimate. Recall that this amount could exceed GM's estimated contribution to the entire
fiscal 2000 year ($2.5-$2.7 million). More importantly, we believe the majority of these clients will contribute to
FreeMarkets' results throughout fiscal 2000 and beyond, adding substantially to both the revenue potential and
the visibility into the business.
· FreeMarkets' customized business-to-business online auctions enable large, industrial buyers of direct goods
and materials to obtain lower, more efficient prices and make better purchasing decisions. The company's
client list from the fourth quarter reads like a who's who of industrial purchasing, including names like General
Electric, Cummins Engine, Eaton, Raytheon, Remington Arms, BP Amoco, SmithKline Beecham, HoneywellInternational, Quaker Oats, Welch Foods, Navistar International, Owens Corning, United Technologies and
Emerson Electric, among others.
· Reiterate Buy Rating. The company's presentation at our conference last week was extraordinarily well
attended, tremendously positive and extremely well received. We believe today's news is indicative of the
natural momentum in FreeMarkets' business and should serve as a catalyst for the stock. |
