Heres' the full VKCO research story: "Mustang.com is a leading provider of enterprise class eService solutions for inbound e-mail management software with more than 330 clients and a run-rate of about 50 new clients per quarter. IDC estimates that the market for worldwide customer service and support applications will increase from $160 million in 1999 to $2 billion by 2003. As the market opportunity continues to grow, Mustang.com should be well- positioned to increase revenues by expanding its client base in targeted vertical markets, developing complementary applications and providing continuing professional services support. We believe that Mustang.com is currently significantly undervalued with a price-to-sales multiple (PSR) of 7.2x FY00 revenue estimates compared to 43.0x for its peer group. As the company continues to land additional clients and increases its revenue base, we expect the discount to narrow. We are initiating coverage of Mustang.com with a Strong Buy rating and a six-month price target of $25 based on 15.0x our FY00 revenue estimates, a 187% discount to its peer group.
ú Mustang.com has a leading client base in the e-mail relationship market with more than 330 clients including E*Offering, Hewitt Associates, Lucent, Mail.com, MCI, MSN, NetZero, Nordstrom and the U.S. Census Bureau. This compares to Kana Communications, Inc.'s 350 clients, and eGain Communication Corp.'s 190 clients.
ú According to IDC, the market opportunity for e-mail relationship software is expected to reach $2 billion by 2003, an 88% annual increase from 1999 estimates. This projected growth is due to the increasing use of the Internet as a medium for customer communication and the cost savings that the software provides.
ú Mustang.com's enterprise class e-mail management software can be installed within 3 to 5 days compared to 4 to 8 weeks for the competition, which minimizes client disruption and allows clients to begin using the product earlier.
ú Mustang.com's hosted solution (set for release during Q1) should increase the company's market opportunity to companies with limited IT resources and expertise. Companies are increasingly turning to the ASP (Application Service Provider) model because of the lack of strain on their IT departments and the ability to pay for the services on a monthly basis.
ú Mustang.com's 87% gross margins lead the industry because of its modular, standards-based architecture, which was designed for easy installation. We anticipate that the company will break even by the end of 2001, or beginning of 2002, with long-term operating margins of 10-15%.
ú CY 2000 revenues are expected to reach $10.1 million, up from our $3.6 million estimate for 1999, a 178% increase due to the company's growth initiatives. This revenue growth is driven by the larger sales force, national expansion plans, new products and increasing market demand for e-mail management software.
ú Mustang.com is currently trading at a PSR of 7.2x our FY00 revenue estimate compared to 43.0x for its peer group. Taking a conservative stance, we feel that Mustang.com should trade at a PSR of 15.0x our FY00 revenue estimates (using the projected 2000 share count of 6,127) over the next 6 months. We are initiating coverage of Mustang.com with a Strong Buy rating and a six-month price target of $25.
COMPANY DESCRIPTION
Mustang.com is a leading provider of eService solutions for business-to-business and business-to-consumer e-mail transactions. The company's core platform, Mustang Message Center (MMC), is an inbound e-mail management platform that enables companies with mission critical operations to manage high volumes of e-mail, Web-based, and faxed communications. MMC is designed to integrate with other leading customer relationship management (CRM) systems to create a centralized point of contact for clients' on line and traditional customer communications.
To date, more than 330 companies worldwide have licensed Mustang Message Center software including 3COM, Barclays Bank, Cablevision, Iomega, MCI, The Microsoft Network (MSN), NetZero, Nordstrom, The U.S. Mint, The U.S. Census Bureau, Value America, Victoria's Secret and Ziff Davis.
Founded in 1986, Mustang.com joined the first generation of Internet companies developing and gaining a leading position in computer bulletin board systems, the precursor of the World Wide Web. |
