Market Tracker,
What is it with this stock market and certain companies that sell books and/or records on the web? These are highly competitive, relatively low-margined businesses, and always will be. It doesn't matter where that business is conducted. IMO, the internet will ultimately make little difference. Yes, the market will expand some, but at the moment, the best possible outcome for any one of these companies is that they somehow manage to steal market share from one another.
This KTEL thing is perfectly emblematic of a completely silly sector in a decidedly silly stock market. This is almost too funny. What's the big deal, don't nearly all of the established retailers in the US have web sites too? Why aren't they considered "internet" companies as well? At least AMZN, CD-NOW, etc. are brand-new, internet-conceived enterprises, with no previous history (or earnings), and as such it makes some very small amount of sense to label them as "internet" companies. KTEL has been flooding the airwaves with its ads for decades, hawking greatest-hits albums, Slim Whitman, Boxcar Willie, et al. Now they are suddenly thrown into the "internet" category simply because they declare intent to offer their wares via the web? Complete, unadulterated insanity. I truly can't wait to see what's next.
That analyst is right, though -- sort of. On a comparative basis, KTEL is as undervalued as an internet company could be, now that it suddenly has become one. But as usual, the truth is not that KTEL is undervalued, but that the other stocks in its newly-found sector are grossly overvalued. Internet retailing is going to be the most competitive environment imaginable. Margins will be so thin that only those entities extremely well-managed and offering truly unique or proprietary products will come anything close to achieving reasonable, sustainable margins. At best, the internet is but an additional (albeit theoretically cost-effective) distribution channel. And the fact is, all players ultimately have approximately same potential in this channel. This is like bidding up the first companies that installed toll-free order numbers!
The coming inevitable internet shakeout, especially among retailers, will pale in comparison to any previous craze/crash-and-burn cycle. However, with KTEL's tiny float and no options with which to hedge, one would have to have his head examined if he shorted it, for now anyway.
A final thought: try to think up every mail-order company with a household name. Using K-TEL logic, they're ALL undervalued!
Ronco/Popeil (pocket fisherman, bamboo steamer, vegematic, ginsu knives, etc.) -- no stock, has web-site.
Sessions (record albums like KTEL) -- no stock, has web-site.
Swiss Colony (X-mas chow) -- no stock, beautiful web-site.
Columbia House (record club) -- no stock, has web-site. IMO, a screaming IPO candidate. Think of the membership lists alone -- what a hype tool that would be! Of course, their problem is they give away way too many albums. No why do you suppose they do THAT?
Lands End (upscale clothing) -- stock symbol LE, has web-site. Why doesn't this stock have a PE of 200?
Others, anyone?
Some of these guys should go public -- with the right promotion they can all be highly successful internet stocks, too! :o) |
