Is this baby going to FLY? Following from Briefing:
Story Stocks Mon 04/13, 1998 ****** 13:30 ET ******
K-TEL INTERNATIONAL (KTEL) 10 1/8 +3 1/2. "Build it, and they will come." Just as the baseball spirits moved Kevin Costner to build a ballpark in the middle of a corn field in the movie Field of Dreams, the market's insatiable thirst for Internet stocks is prodding companies to establish web sites. No longer does the investment community (at least the Internet investment community) concern itself with the complexities and costs of doing business online, they simply want companies to throw up the sites. Their rationale: Build it, and they will come. Not consumers necessarily-- they are referring to investors. In this particular case, KTEL, a Plymouth, Minn-based marketer of music and videos, announced that it is launching K-tel Express, a 24-hour e-commerce site. K-tel Express will feature more than 250,000 music titles through its on-line shopping service "at value prices." So let's make sure we've got this straight: This company, which previously marketed its products through retailers and through mail order, says it is going to launch a Web site --and compete with the likes of CDNow, NTK Inc, and Amazon.com-- and the news is good for 53%. Exactly! But before we jump to conclusions (conclusions such as: this move is simply a ploy to nudge the stock atop the wave of Internet enthusiasm... or, this Web site is going to be a money-pit... or, these guys don't stand a chance against cash-rich, recent IPOs such as CDNow and NTK Inc), let's listen to K-Tel's story. According to the company, it will use its 35-years of direct marketing experience and newly developed direct-to-the-consumer marketing methods to get its URL in the face of investors. Moreover, the company says it will rely heavily upon its worldwide television expenditures to drive traffic to the site and gain marketshare. Sounds as if "Guerrilla Marketing" has invaded the online music retailing community. If this company is even modestly successful moving its wares online, then KTEL is a potential superstar. Even after today's handsome rise, KTEL trades at just 0.41x trailing sales. Compare that to the Price/Sales ratios of 24 and 33 sported by CDNow and NTK Inc, respectively. What's more, KTEL even makes money. For 1997, the company made $3.2 million or $0.81 a share, on sales of $75.5 million. Of course, if the company wants its valuation to catch up with that of other big-name Internet plays, it's going to have to do something about the year/year sales growth of 5% (but that's what the new web site is for).
I never thought I'd have anything to do with KTEL but made a play today near $19-
Regards, |
