The Growth Report November 21st 2001
Vol. 1 Issue 14 <http://www.growthreport.com/>
“Resilience and Results Fuels eSpeed”
As Growth Report continues to search for opportunities arising from the fall-out of the markets in September, we find ourselves as close as we can get to Ground Zero. eSpeed Inc. has been in the news of late due to its affiliation with Cantor Fitzgerald, the leading fixed-income securities brokerage which was devastated by the September 11th World Trade Center attacks.
eSpeed Inc. (NASDAQ: ESPD <http://www.stockhouse.com/comp_info.asp?symbol=ESPD&table=list>)
$7.45 Close November 20th 2001
54.97 million shares outstanding
$34.75 52wk high $4.60 52wk low
$409 million market capitalization
eSpeed, Inc. is the leading provider of business-to-business electronic marketplace solutions for the trading of pretty much any product via its global and privately managed network as well as the Internet. In 2000, the Company processed over 3 million electronic transactions, totaling more than $32 trillion of transactional volume. eSpeed has in excess of 650 clients, including the largest fixed income and leading natural gas and electricity trading firms in the world, providing electronic trading, credit analysis and clearing services. eSpeed's infrastructure allows its clients to make real-time transactions involving corporate and municipal bonds, US agency securities, Eurobonds, and government securities in several currencies.
So what exactly does eSpeed do?
eSpeed has one of the premier real-time electronic exchange platforms in the world. Each day, more than 650 customers worldwide, including the world's 25 largest bond trading firms, trade billions of dollars worth of securities using the eSpeed® system. The eSpeed platform can support the trade in any financial instrument, commodity or commodity-like product. Expanding on this flexibility, the system can be accessed in a variety of different forms. These include: direct web access through web-browsers to proprietary direct client trading applications, even through private network’s accessing eSpeed’s impressive global high-speed data network distributed through 50,000 miles of cables; 22 hub cities; and 2 global data centers. The system has proved so reliable that it was used greatly in the days following the loss of much of Cantor Fitzgerald’s traditional operating capacity as a result of the World Trade Center attacks. However, the Company remains a sobering reminder of the devastation, which took the lives of 180 of its 480 staff.
Yesterday, the Company’s stock soared after chief executive, Howard Lutnick, reported during a conference call with analysts that the dominant electronic interdealer broker would be profitable in the fourth quarter and record positive cash-flow. Lutnick offered financial guidance of a small profit of between 1-5 cents in the fourth quarter, the first time the eSpeed would have reported profitability in its brief two and a half year history as a public company. Growth Report believes that the Company should continue to prosper as it has demonstrated its ability to survive the most horrible events. Given the fact that the Company lost so many of its employees as well as its headquarters, profitability delayed by just one quarter than originally expected, represents a very strong statement as to the well-being and resolve of the Company and its management team and employees.
The bottom line…
eSpeed’s revenues for the third quarter increased by 25% to $28.2 million, with the Company reporting a net operating loss, before charges, of $4.1 million or $0.08/share. The Company remains extremely well funded with close to $150 million in cash and cash equivalents as of September 30, 2001. This equates to approximately $2.75/share. Despite missing analyst forecasts, eSpeed’s stock rallied in response to the positive comments regarding profitability in the fourth quarter.
The significance, and indeed the resilience, of the eSpeed technology platform was demonstrated in that it was ready for business when the U.S. bond market re-opened, 47 hours after eSpeed’s headquarters were destroyed on September 11th. In fact, the eSpeed platform was operating in Europe, Asia and Canada on September 11th and 12th in markets which were uninterrupted by the attacks on the U.S. Today, eSpeed’s technology is fully operational and is powering the largest North American markets: U.S. Treasuries, U.S. Agencies, Canadian Government Bonds, electricity, natural gas, coal, emission allowances and weather. In addition, eSpeed continues to power all of its previous European and Asian markets.
Mr. Lutnick, whose appearance and comments on CNBC yesterday seemed to further power the eSpeed’s stock rally, said, “Despite tragic and horrific events that took place only two months ago, our outlook remains extremely positive. We continue to see tremendous opportunities to license our software as well as new opportunities to partner with fixed income brokers beyond Cantor Fitzgerald and other financial institutions to expand our revenue channels.”
Growth Report believes that the efforts of Mr. Lutnick and the employees of eSpeed will command substantial market attention as the Company creates a fitting legacy to the efforts of those so tragically lost in the terrorist attacks. eSpeed has fallen a long way from its high’s of over $80/share in 2000 but as the Company begins to report ongoing profitability in the fourth quarter and next year, the stock is expected to further appreciate from its lows. We recommend shares of eSpeed with a 12-month target of $15.00/share. |
