Taxi, before shorting too many more eggs read this, from thestreet.com Herb Greenberg
<<Herb on TheStreet: Why Egghead May Be the Poor Man's Internet Play
By Herb Greenberg
Senior Columnist
3/10/98 9:22 AM ET
In the six weeks since announcing that it was dumping its humpty-dumpty image by shutting its stores to become a pure Internet retailer of computer products, Egghead.com's (EGGS:Nasdaq) stock price has zoomed 57%. Still, even after yesterday's mad rush back into the Internet by confused tech investors, the old Egghead Software is quickly picking up a reputation in some investment circles as the poor man's Internet play.
The numbers tell the story: Egghead trades at a mere two times its book value of around $4. That compares with Onsale (ONSL:Nasdaq), another computer equipment retailer, which trades at 30 times its book of a buck. Other hot Net stock book multiples: Amazon.com (AMZN:Nasdaq) is at 53 times; Yahoo! (YHOO:Nasdaq), 34 times; AOL (AOL:NYSE), 42 times; and Excite (XCIT:Nasdaq), 29 times.
What's more, Egghead has a market cap of $262 million versus $614 million for Onsale. But Onsale has only 66 cents per share in cash versus Egghead's $2.50 per share. Furthermore, thanks to a flurry of marketing alliances with the likes of Yahoo! and C/Net (CNWK:Nasdaq), Egghead rang up an average of $2 million in Internet sales per week in February, double its January rate. (A weekly rate of $2 million would put it just about on par with Onsale's third-quarter revenues.)
If Egghead received the same price-to-book as Onsale, it would trade at 120, not 11 3/8, which is where it closed yesterday. (Onsale closed at 33.) Leads you to wonder whether Egghead is too cheap and everybody else is simply too expensive -- or perhaps a little of both.
Whichever it is, expect to hear more from Egghead in coming days. The company, which has yet to get any major analyst recommendations, is heading to New York and Boston for a week of dog-and-pony shows.
Its biggest challenge will be to convince Wall Street that despite having lost money in recent years, it isn't damaged goods and should be treated like the rest of the Internet pack. Unfortunately, when it comes to the investment community, "To have lost profit is a sin," says quotemeister David Simons, managing director of Digital Video Investments in New York. "To never have had it is reason for faith.">>
Dave
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