To all SI CKFR lovers,
Here's a detailed analysis from a leading analyst on our favorite stock checkfree. please read it carefully and make yr own judgement on the stock. I'm accumulating the stock at every dip!!
-----------------------------------------------------------------
CheckFree
(CKFR-NASDAQ, 23 on Mar 19th)
Highlights:
Explosive growth prospects driven by incremental subscriber additions and payment-processing deals with big banks and utility companies - market share leader in electronic payment processing - revenue growth of 81% in its mainline business of processing and servicing - again exceeded consensus estimates - expected by consensus to breakeven in current quarter and show first profit in 2nd quarter.
Electronic commerce - a.k.a. e-commerce - has vaulted into the vernacular of analysts and investors on both Wall Street and Main Street - and for good reason. As names such as Amazon (books), Onsale (computers and other electronic equipment) launch growing retail sales businesses over the internet and others such as Intuit (personal finance software) and, most recently, Egghead (retail consumer software) abandon "shrink-wrapped" off-the-shelf sales for the internet model, the legitimacy of e-commerce as a growth vehicle is abundantly clear. Now, be sure to add CheckFree to the list - the top of the list - of companies who will be the leading beneficiaries of electronic commerce.
CheckFree is the leading processor of on-line bill payments. As such, it stands to be a beneficiary of some of the leading macro-trends of our day, including the continued entrenchment of the two-earner nuclear family, the integration of the internet into mainstream daily life, and the increasing reliance in the banking industry on technology to pare transaction costs and improve the banks' bottom lines.
CheckFree grows its business by increasing its subscriber base. It does that in two ways: one, by inking deals with banks that allow bank customers to pay bills electronically and, two, by signing up utilities, insurance companies, and other direct billers to allow them to bill their customers electronically. The service CheckFree provides is immensely appealing to businesses - both banks and direct billers - because it reduces costs. The appeal is manifest in the rate at which CheckFree has logged agreements with banks and others. It has agreements to provide billing and payment processing for over 1,000 businesses and 850 financial institutions, including most of the largest banks in the land: Chase Manhattan, NationsBank, Citicorp, Wells Fargo, First Union, and others. Chase Manhattan alone is adding 25,000 new subscribers per month. In October, CheckFree reached agreement with a consortium (known as the "Integrion Consortium") of banks, IBM, and Visa to handle all of the back-end payment processing required by the consortium's member financial institutions. Integrion also took an equity stake in CheckFree. Intuit, the parent of the leading personal finance software, known as Quicken, also has a minority equity stake in CheckFree. More significantly, Intuit steers all of its payment processing needs to CheckFree as well.
In all, CheckFree claims to have more than 2.2 million home banking and bill payment subscribers, a 70 percent increase between December 31, 1996 and 1997. As its subscriber base grows, margins benefit from scale economies. And the subscriber base is growing faster than anyone - including leading industry analysts - has imagined. It follows that CheckFree has exceeded consensus estimates for the last three-quarters running. In the quarter ending December 31, 1997, reported last Tuesday, CheckFree beat the consensus by $0.02 in losing $0.02 per share. Its CEO, Peter Kight, has stated he is comfortable with analyst's projections that the company will break even in the current quarter.
CheckFree's share price has pulled back from an all-time high of $31 to the mid-20s. One reason for the pull back is the drum beating that its chief competitor - none other than a certain behemoth from the Pacific Northwest (yes, Microsoft) - has done over the last few months. Microsoft and its partner, First Data Corp., are gunning for CheckFree. Certainly, Microsoft's threat should not be understated. Nevertheless, on all measures - agreements with banks and billers; subscriber base; and, technological infrastructure - Microsoft falls short of CheckFree. Moreover, CheckFree has been able to extend its lead over Microsoft-First Data despite the latter's marketing prowess and deep pockets.
We recommend Checkfree as a strong buy. Adding up the company's: (1) exponential growth in its key revenue driver - number of subscribers; (2) concomitant top line growth in excess of 50%; (3) increasing realization of scale economies from subscriber growth; (4) "pioneer premium" realizable from its investment in infrastructure, consumer and industry name recognition, and exclusive back-end processing agreements with Intuit and Integrion (all significant entry barriers); and, (5) substantial insider ownership ---
-----------------------------------------------------------------
That's all for now folks, preparing to get some more bargains tomorrow as it is a triple witching Friday.
-Long live bull markets.
-Kalpesh |
