NEXT STOP.....250!......
Eric Upin, eric@rsco.com
INTERNET CAPITAL GROUP STRATEGY APPEARS TO BE WORKING
On Monday, we upgraded Internet Capital Group to Strong Buy and published a
12-to-18-month price target of $250. We believe the company is executing well and
capitalizing on its first-mover advantage by building a strong network of B2B market
makers and infrastructure providers, recruiting a deep, experienced management team,
partnering with blue-chip industry players and leveraging its collective resources to
accelerate growth. What follows is a bit more detail on why we consider ICG the franchise
name in B2B.
First, the fundamentals of B2B eCommerce are compelling. Annual transaction
volume is expected to reach $3 trillion to $5 trillion over the next two to five years,
translating into between $250 billion and $500 billion in potential revenue for new
B2B marketplaces. We believe ICG is a great way to play the space as a
diversified holding company with more than 50 private companies in its portfolio and
$1.3 billion to invest. ICG already covers 34 of its 50 target markets and has 20
infrastructure plays. We believe the expansion will accelerate as IGC creates new
incubators in conjunction with Fortune 500 companies.
We believe ICG's incubator strategy is working. It helps its portfolio companies with
recruiting, operations and technology infrastructure and introduces them to
strategic partners, customers and suppliers, playing a meaningful role in their
development.
As investors gain a better understanding of the quality of ICG's portfolio and
management team, coupled with the likely step-up in valuations as portfolio
companies make the transition from private to publicly held, we expect the stock to
move higher. In our opinion, there is tremendous value in the portfolio: the five
public companies today are worth $16 billion in market cap. ICG has 52 that are
still private, representing the better names in B2B, in our opinion, and potential
beneficiaries of a 5 to 10x valuation boost as they go public.
We expect several near-term catalysts for the stock, including this week's investor
forum, IPO deals in registration, additional ventures with high-octane partners and
international expansion initiatives.
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eConsumer Update
Lauren Cooks Levitan |
